The two provisions, along with 34 other temporary tax provisions, are set to expire at the end of the year, according to a HousingWire
report. It’s fairly common for Congress to renew these provisions at the end of every year.
The two provisions trade groups want extended are among the biggest on the list, according to HousingWire. The Tax Foundation projected that they would cost $7.5 billion in 2016. However, industry groups say these two are critical aids to homeowners.
The first provision prevents underwater homeowners from being taxed it their lender reduces the principal balance on their loan, or if some of their mortgage debt is forgiven as the result of a short sale
“If Congress fails to act, struggling homeowners who accept short sale
s or a loan modification offer could be faced with a substantial tax assessment,” the letter said. “The current provision, if extended, would aid many loss mitigation efforts and provide borrowers with the certainty that they will not be faced with a large, unexpected tax bill.”
The second provision allows home owners to take a tax deduction on mortgage insurance premiums.
“Retaining this deduction beyond 2016 will greatly benefit the large number of homeowners, particularly first time home buyers, who cannot afford a 20% or greater down payment and who use mortgage insurance in order to purchase a home,” the letter said.
In a joint letter to House Speaker Paul Ryan and other congressional leaders, major mortgage and housing industry trade groups are urging lawmakers to renew two major tax provisions aimed at helping homebuyers.