Homeowner tax breaks expire

Time to say goodbye to the deduction for private-mortgage-insurance premiums.

By MSN Real Estate partner Jan 2, 2014 9:34AM

© CorbisBy Jeff Brown, MainStreet

 

Homeowner alert: Several tax breaks that have been around for years expired at midnight on Dec. 31. While Congress has often renewed expired breaks retroactively, there's no guarantee that will happen with these.

 

Of the three key "temporary" breaks created during the financial crisis, the one that probably affects the largest number of homeowners is a deduction for private-mortgage-insurance premiums.

 

Private mortgage interest is generally charged to borrowers who put less than 20 percent down, to protect the lender in case of a default. Usually, it is just part of the monthly mortgage payment, so it can go unnoticed much of the time. But at an annual average of 0.5 percent of the loan amount, it can add up to many thousands of dollars over the years. Deducting it on the federal income tax return can trim that cost by 15 percent, 25 percent, 35 percent or more, depending on the homeowner's tax bracket.

 

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So if you've been counting on this deduction as you budget, you'll have to adjust. And if you are planning to take out a new mortgage, the lack of this deduction is just one more reason to come up with a 20 percent down payment to avoid paying PMI in the first place.

The most valuable of the expiring deductions is for loan forgiveness, a discount on the mortgage debt. In recent years, growing numbers of homeowners who ran into trouble got their lenders to agree to remedies such as short sales, in which the lender accepts the home's sale proceeds as enough to pay off the debt, even if the debt was larger.

 

The difference between what was owed and what was actually paid is considered taxable income. The tax has been waived for a number of years; now it will again be charged. That could easily add thousands to tax bill of a homeowner who engages in a short sale.

Fortunately, rising home values are reducing the ranks of underwater homeowners who owe more than their homes are worth, but there are still millions of them. A short sale is still less damaging to the borrower's credit than a foreclosure, but neither is desirable.

 

Also expiring are credits for energy-efficiency improvements such as installing better doors and windows, insulation, furnaces, heat pumps, water heaters and central air conditioning. Some other credits remain, for things such as installing solar water heaters, wind turbines and geothermal heat systems.

Fortunately, these three breaks remain in effect for the 2013 return due in April, so you can still claim any that apply to you for the 2013 calendar year. And there's always a chance Congress will renew some or all of them, so stay tuned. For now, though, it's prudent to assume none of these breaks will be available in 2014.

 

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241Comments
Jan 3, 2014 4:40PM
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PMI =private mortgage INSURANCE, not interest....
Jan 3, 2014 4:29PM
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sis ,youv've drunk too much kool-aid to even try to save
Jan 3, 2014 2:05PM
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everyone blames the gop for everything. One thing everyone forgets the dems had lots ofr power for how many years?? think about it over the years. The gop is no prize but really just put the blam where it belongs on both party's. But I'll bet the one's that complain are the one's that vote for the same person thats been there for ever.  If u want change vote for someone else if not shut-up
Jan 3, 2014 2:03PM
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I am just amazed at how little freedom we have lost over the past 50 years. the young people just don't get it how much they have lost. Noting that we elected these people to work for us, To making our life a pleasure to live. But in stead they make laws that tell how to eat and, ,what to drink. what insurance to buy .        WAKE UP PEOPLE YOU ARE GETTING SCREWED AND YOUR TO DUMB TO SEE IT.

Jan 3, 2014 2:00PM
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You know everyone blames the gop for everything. 
Jan 3, 2014 1:15PM
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Just another way the GOP is working hard against U.S. in stead of creating ways to grow the economy and good paying jobs.
Jan 3, 2014 12:56PM
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Best law they SHOULD MAKE....

 

You can't get more than you put in.......   no more welfare moms who only make 10k getting back checks for 7-8k.....

 

Change capital gains and dividends to 25% top level........

 

Simple....

Takes the free out of the freeloader

& ensures that investors don't pay a lessor rate than their secretaries.

Jan 3, 2014 12:31PM
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All of these housing problems came about by the Lying Liberals with there touchy feely we must be fair to idiots too. The truth of the matter will show as every **** Liberal Dumbocrap will defend and blame others, The proof is found with there great Messiah { YOU CAN KEEP YOUR POLICY PERIOD} of course some people because of cultural nurturing see nothing wrong with lying its taught as normal. 
Jan 3, 2014 12:18PM
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T.E.E. - The division comes from the left.  If a conservative disagrees with 0bama, they label the conservative a racist.  Yet, any time there is a conservative who is black, the left calls them an "Uncle Tom."

We can't move on like that.  When the ones controlling the dialogue ( "mainstream-media" ) then we can't have a rational discussion.  

The left has a different (lower) standard for themselves than they do for anyone else - and all that does is bring everyone down.  

Once they bring their standard up and actually not only accept views from the other side, but RESPECT THEM as well then our country can move forward.
Jan 3, 2014 12:15PM
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I don't understand the hissy fits over paying taxes. I reside in the lower middle class. I own a home, get by paycheck to paycheck. I like streetlights, paved roads, bridges that don't fall down and sewers that don't break. I think it is quite fair that we pay for these things. Schools, police, fire, road crews, etc are all tax supported.

A flat tax doesn't work and is not fair simply because 15% of a person making 20K a year is a huge hit that can make the difference between rent and food. Where as a person making 200K can easily hand over 15% without wondering if they can take care of their family.

AND for the extra arguments of 'get an education', 'get a better job', etc. . . . Not everyone has those options, opportunities or abilities. However, everyone does deserve to have certain things whether they can make big money or not. A roof over their heads, food in their mouths and basic healthcare.

If everyone paid their FAIR share it would be good for EVERYONE. It would be shared goods and services along with the shared pain of paying taxes. Nobody gets a free ride, it costs one way or the other. The rich just have more to pay to maintain our country as they are more able too. Don't forget that the poor and middle class pay a higher percentage of their income in sales taxes than the rich.  It also hits harder the lower the income.

Jan 3, 2014 12:13PM
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Yes, America is rapidly declining not because we are divided on politics but because we are divided on work ethics.  40% of us believe that hard work pays off and the other 60% believes in handouts.  Lazy **** Americans.  
Jan 3, 2014 11:52AM
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America is doomed, because you people are determined to keep the nation divided along political lines. It is this division that has prevented the nation from advancing. We are too naïve to realize that the country would be at her best if the people were united and involved. This is the first time in the nation's history that the people placed their petty, personal, feelings before the welfare of the nation. Frankly, it is difficult to believe that you can't see the damage this is doing to America. Our nation is deteriorating, and we are too naïve to unite as citizens, and make her the great nation she is so capable of becoming. To put anything other than your religious convictions before your country is inexcusable. America is on a rapid decline, and the American people are too naïve to stop it. For that reason, I say we deserves nothing better. Believe it or not, our ignorance is what's wrong with America. Remain divided and see where that takes you. 
Jan 3, 2014 11:00AM
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That's great....these homeowners that voted democrat need to pay more money...it's about time they pitch in.. they always want other people to pay.
Jan 3, 2014 10:57AM
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Those in our Country who are not too bright just refuse to acknowledge that a liberal agenda keeps spending more and more, hence needs to gobble more and more...raise all types of  taxes on everything, charge "fees" on many mandated purchases, limit tax deductions, soak the wealthy more, and limit earned payments to those deemed to "not need them". 
Jan 3, 2014 10:32AM
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And I thought Oblamer was going to help the middle class?!?!?!? Why is he allowing this to happen?!?!?!?
Jan 3, 2014 10:29AM
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I think it's funny how the so called "poor" people always blame the "rich" for everything. When it comes down to it, it's one word: JEALOUSY. No if's, and's, or but's about it. If these so called "poor" people were actually to strike it "rich" one day, how do you think they would feel about "rich" people then? I bet it's totally different.
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I am glad to see this kind of information made public, thank you.
Jan 3, 2014 10:13AM
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There was another article the other day saying a bunch businesses like the Railroads & airlines are losing the ability to write off operating expenses? Plus another article says teachers are losing their classroom deduction, no more energy eficiency or electic vehicle deductions, Mortgage forclosure or short sale (is classified as income?) exclusion, State and local tax, transit benefits are all history? And you can bet your bottom dollar the IRS is still digging to find all they can for these IGNORANT people we have in office WHO CAN'T FIND ANY CUTS IN THEIR NECK OF THE WOODS! got a rope?

Jan 3, 2014 10:06AM
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I wasn't required to get PMI, but I bought my place 10 years ago.  I didn't put anything down, either.  I refinanced 5 years in and still don't have PMI.  Guess I lucked out.
Jan 3, 2014 8:18AM
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Thankfully I got my loan through the VA & they don't require PMI even if you go zero-down like I did. One benefit of military service.
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