A housing recovery moving in fits and starts is fueling new efforts on Capitol Hill to protect tax incentives for home ownership and oppose any reductions in the tax breaks that might be part of a broad tax overhaul.
Top tax writers in both chambers say they want to provide stability to the housing industry.
House Ways and Means Chairman Dave Camp, R-Mich., is expected to move several popular tax breaks backed by the industry, including a proposal (HR 4845) by Rep. Devin Nunes, R-Calif., to make permanent a tax break for private mortgage insurance.
Nunes said the proposal was one of several tax break extensions that would send important signals to key business sectors in a time of slow growth. “We’re trying to get something by the end of the year,” Nunes said. “If you are not going to do a comprehensive fix, you are left with patchwork.”
The mortgage provisions in the tax code have become what seem like the natural order of American economic life, led by the mortgage interest deduction. Camp earlier this year sent ripples of concern through the housing industry when he proposed, as part of a tax overhaul, to limit the interest deduction to mortgages of less than $500,000, rather than the current limit of $1 million and end write-offs for property taxes and home equity loans unless they are used for renovation.
In addition to limiting the principal amount, lawmakers have discussed turning the mortgage deduction into a tax credit so that it could be claimed by all families, whether they itemize deductions or not.
Such dramatic changes no longer seem likely, now that efforts to rewrite the tax code have been buried in this Congress and faltering economic figures have drained enthusiasm for addressing anything as fundamental as mortgage finance.
Instead, both parties are looking to reassure the nation’s 50 million homeowners in a real estate market still looking for equilibrium. The market looked strong last month, with new residential sales growing 18.6 percent from April to the highest annualized level since January 1992. But the Mortgage Bankers Association projects 5.28 million home sales in 2014, a 4 percent drop from last year and the first such decline in four years.
That’s why lawmakers are looking for ways to help build a stronger recovery, not undermine the expansion the market is seeing.
Senate Finance Chairman Ron Wyden has backed a Senate bill (S 2260) with 50 temporary tax break extensions, including a two-year extension of the private mortgage insurance write-off, which would cost $1.9 billion. The measure also includes a $5.4 billion extension of a law that generally allows taxpayers to exclude from their taxable income the amount of debts discharged in a foreclosure or loan restructuring.
Sen. Jeff Flake, R-Ariz., takes a selfie with his cut-out head during the Hoops for Youth 16th annual charity basketball game held at George Washington University's Smith Center, September 8, 2014. The members of Congress team beat the lobbyist team 46-40. Buy photo here.