Homeowner tax breaks expire

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

By MSN Real Estate partner Jan 2, 2014 2:34PM

© 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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Jan 3, 2014 10:25AM
There is an easy fix to all of this, its been around for years. Its called a flat tax, that way the rich pay their "fair share" that the left has been complaining about for years, the poor pay something for the benefits they receive, those in the middle are treated equitably, and the winners and losers are not picked by how good your accountant is.

The left will hate this because the bottom 50% will have to pay something, the right will not like it because they will lose their shelters and the guy in the middle would be the true beneficiary, but neither party cares about him anyway. The lower 50% is where the votes are, the upper 5% is where the money is, and the guy in the middle is as important to R's & D's as last years' poll.

Jan 3, 2014 9:27AM
I wonder when the automatic pay raises Congress gives themselves will expire.
Jan 3, 2014 10:24AM

Quit whining about the rich!  I made them my customers, and they support 22 families in our business.

Now I made middle class!

They put cheese on our burgers!

The key is to get off your butt, get educated, quit whining and DO something!

Jan 3, 2014 1:00AM
A tax revolt is very near
Americans with jobs cannot pay for those that do not work
Jan 3, 2014 11:14AM

"Loan Forgiveness", what a crock of sh!t. I paid my mortgage off, and all I have to show for it are property taxes that now exceed what my mortgage payment used to be.  Who do you think is footing the bill for all of these people who made poor choices, and could not afford the loan they took out?



Jan 2, 2014 11:37PM
The people in WASH. need to Stop coming up with ways to Tax People to Death and Stop Wasting the TaxPayers Money on Junk and programs that line their own pockets
Jan 3, 2014 12:04AM

I Don't mind paying my share of taxes, but I know that I am paying my share and the lazy asses that lives next door, does not work and lives much better than my family. Why because they get welfare, free housing, and food stamps...oh yeah that I am paying for, along with all the rest of us hard working Ameicans. Taxes need to be rounded out better, flat tax is a great idea the more you make the more you pay, why is that the little man has to pay all the taxes. The banks are getting extremely rich off all of ****es that keep paying high interest rates, and fees that are slapped on to housing loans just so they can get rich. Don't get me started on the ****ing government and there wrong ways of taking care of the American public.

Jan 2, 2014 6:38PM
You never really own your house, real estate taxes are your perpetual second mortgage and like a mortgage, if you default, the County will take it from you.
Jan 3, 2014 8:51AM
Taxes might be viewed in a better light of the people who pay the bulk of them actually were served to an acceptable degree by them.
When people work hard just to see it all drift away to support those who don't work and an uncaring government that sold out to corporations and special interests,  that's the beginning of class warfare. 
The rich,  meanwhile,  stay out of it and just count their money.

Jan 2, 2014 8:00PM
Can't remember who said this but "I don't pay taxes, they (Govts.) take taxes." And should you not allow them to take those taxes they(Govts.) will take anything and everything you own.

Jan 2, 2014 7:25PM
Debt and taxes, the curse of the ages!!!  Our government's actions are killing everyone's hopes for the future, thus creating a "might-as-well-have -it-now" mentality.  Rich or enabled, poor, when there is no more to consume, three IS NO MORE!  It won't matter how much money you have, or who has it, it won't be worth squat because there won't be anything to buy.  Our government is fostering a "no-production" society -- people will either be too lazy to work, have no skills to produce anything, or simply see no reason to put out useless/profit-less effort to do anything.  The government is killing the purpose, the hope, the drive for success.  Choked rapidly or slowly, the end result is still the same.
Jan 3, 2014 12:24PM
Everyone is getting the screws turned to them by this administration & especially the middle class.  
Jan 2, 2014 9:57PM
You people that voted this back street organizer into the greatest office in the world deserve what you are getting.... the rest of us just have to hang on and hope that things get better in about three years. 
Jan 3, 2014 11:59AM
but but but, I thought only the rich were going to pay more taxes ?
Jan 2, 2014 9:58PM
gotta get these liberal democracts out of office
Jan 2, 2014 5:51PM
The politicians will do as they please and like the world's oldest profession, they're still going to do it. The question is what are we going to do about it?
Jan 2, 2014 7:03PM
There should be but one tax.. flat tax. the only deduction(s) allowable should be those specific to the human condition: food, clothing, shelter, medical and education if any are to be allowed. Except whereas the new liberal fuzzy math is applied whatever the percentage tax rate it is factually and mathematically the same when applied to any given number.  Everybody has skin in the game so to say. It is in my mind the fairest of all possible tax (schemes).
Jan 2, 2014 9:59PM
Unnoticed most of the time? Wake up an smell the coffee pal. PMI is a big rip off and it's a lot more than just a little bit.
Jan 2, 2014 5:17PM
yes. property taxes are outrageous and will only get worse and will result in many losing or not being able to stay in their homes. they got it all figured out...can't pay..we take the house. sorry
Jan 3, 2014 11:51AM
And yet democrats claim only the wealthy get tax breaks.
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