LEGISLATIVE AFFAIRS: Realtors Support Renewal of Tax Provisions
Philip Weiden | November 28, 2016
With the presidential election over we can now, hopefully, move on to the business of governing. The election brings a new administration and new priorities. For the housing industry it is important that we pass several pieces of legislation and be watchful of others. It is particularly imperative that we extend two critical housing tax provisions that are consequential to the housing market overall and New York State in particular.
Both provisions are part of the tax code. The first is the mortgage debt forgiveness provision, which forgives taxes on a short sale when the principal is reduced and allows a short sale to occur. If the mortgage debt forgiveness provision is not renewed we could see short sales turn into foreclosures. This provision helps underwater homeowners who want to sell their homes, but could face a massive tax bill on the amount of debt forgiven if this provision is not enacted.
The next item in the tax extender package that we must take action on is to continue to allow the deduction for mortgage premium insurance paid by the homeowner. For a $200,000 home, many homeowners are currently able to deduct between $600 and $1,000 from their taxes. In New York where taxes are relatively high, this is another added benefit that helps to keep home ownership affordable. This deduction would benefit those homeowners who cannot afford a 20% down payment and must buy insurance in order to make their first home purchase.
These provisions would raise the U.S. budget by $7.5 billion, according to the Tax Foundation. We can readily afford to renew these provisions as the federal budget totals more than $3.5 trillion. This is a small amount of money that can help homeowners in distress and first-time buyers with the purchase of their first home. The ideal would be for these provisions to be made permanent, but at the very least, they should be renewed for several years. Stay tuned for updates as we move into the New Year.