A bevy of lawmakers, including the powerful vice chair of the U.S. House of Representatives' tax law writing committee, has introduced legislation seeking to restore the tax deduction for private mortgage insurance.
For 14 years, beginning in 2007, borrowers who put less than 20% down on their home loans could write off at least a portion of the mortgage insurance premiums (MIPs) lenders required to protect them against default. But that provision was allowed to expire.
Repeated attempts have been made to resurrect the deduction without success.
Now, Rep. Vern Buchanan (R-FL), second in charge at the House Committee on Ways and Means, and Rep. Jimmy Panetta (D-CA), have thrown a new bill into the hopper: the Middle Class Mortgage Insurance Premium Act. And this time, they would raise the income limit for the deduction from $100,000 to $200,000 per family.
Making their bill truly bipartisan, the two lawmakers are joined by House co-sponsors Mike Carey (R-OH), Susan DelBene (D-WA), Scott Fitzgerald (R-WI), Gwen Moore (D-WI), Sarah McBride (D-DE), Linda Sanchez (D-CA), Brad Schneider (D-IL), Brad Sherman (D-CA), and Bryan Steil (R-WI). So far, though, companion legislation has not been offered in the Senate.
With housing prices climbing ever higher, Rep. Buchanan contended it is the “responsibility” of Congress to provide tax relief for those seeking to buy a home. He said the legislation will “help make the American Dream of home ownership real for millions of Americans.”
As far as the potential scope of the bill, speaking just for his state alone, Buchanan pointed out in a release this week that some 360,000 Florida homebuyers used mortgage insurance in 2020.
U.S. Mortgage Insurers, a Washington, D.C.-based association representing the nation's leading private mortgage insurance companies, called the bill “common-sense legislation,” especially with the expanded income eligibility.
According to USMI President Scott Appleton, the deduction was claimed by some 44.5 million taxpayers before it was allowed to expire, representing a combined $64.7 billion in deductions or an average annual write-off of $1,454 per qualified taxpayer.
“The Middle Class Mortgage Insurance Premium Act is a positive step towards putting money back in the pockets of taxpayers and making homeownership more affordable for American families,” Appleton said in a statement. “Unfortunately, its expiration has deprived millions of low- and moderate-income taxpayers from benefitting from this deduction in recent years.”
Meanwhile, Rep. Buchanan proposed a second bill, this one to exempt high-rise condominiums from the percentage-of-completion accounting method which currently creates burdensome federal income tax issues for condominium developers.
In 1988, Congress exempted most home construction contracts from the percentage-of-completion method. But as written, the exemption does not extend to high-rise condos.
Though developers receive customer deposits while their buildings are under construction, they do not receive the balance of the purchase price until the building is finished and buyers go to closing. However, the Internal Revenue Service requires developers to pay income taxes as construction progresses, as opposed to when the balance is fully paid.
This often creates significant taxable income with no cash available to pay the taxes, the Florida lawmaker explained.
“Condos provide a great opportunity for low- and middle-income families to enter the housing market,” he said. “We should be making it easier, not harder, for developers to increase the housing supply for those most impacted by the nationwide housing crisis.”
