|This article was published on: 02/01/2007|
Front Lines: Washington Report
Daily online news updates at REALTOR.org/realtormag
NAR PAC leads
The REALTORSŪ Political Action Committee was the largest PAC contributor to U.S. House and Senate candidates in the 2006 election cycle, according to Federal Election Commission data. As of the end of 2006, RPAC had contributed $3.7 million, some $800,000 more than the next largest contributor, the National Beer Wholesalers Association PAC, which contributed $2.9 million. The National Association of Home Builders’ Build PAC was fourth with $2.8 million. RPAC’s contributions were also the most bipartisan: 48 percent of its contributions were directed to Democrats and 51 percent to Republicans, Center for Responsive Politics data through mid-October 2006 show.
Real estate provisions extended
Two tax provisions of interest to practitioners were passed in the closing days of the 109th Congress. Rules permitting a 15-year cost recovery period for leasehold improvements were made retroactive to Jan. 1, 2006, and the tax deduction for brownfields cleanup expenditures was renewed, also as of Jan. 1, 2006. Both provisions will expire again on Dec. 31, 2007.
Congress also passed a one-year-only provision that would allow some year 2007 home buyers to deduct the cost of their mortgage insurance premiums. (See “Mortgage insurance premium made deductible,” this page.)
Mortgage insurance premium made deductible
Borrowers paying a monthly mortgage insurance premium get a break under tax legislation President George W. Bush signed shortly before the close of 2006, though the break is very narrowly targeted to just a few home owners.
Here’s a quick look at some of the provisions of the new mortgage insurance premium deduction based on an NAR analysis:
One year term. The deduction applies only to MI policies issued in 2007 for homes purchased in 2007. It doesn’t apply to premium payments for policies issued before 2007.
Widespread applicability. The deduction applies to private MI, and to FHA, VA, and Rural Housing Service premiums as well. The MI premium amount is to be treated as mortgage interest.
Income eligibility. The new deduction is available only to individuals or families with less than $100,000 adjusted gross income (AGI) on a joint or single tax return ($50,000 for married filing separately).
Phase out. The provision phases out by 10 percent for each $1,000 of AGI over $100,000 ($50,000 for married filing separately). Thus, there is no MI deduction for individuals or families with AGI above $110,000 ($55,000 for married filing separately).
Premium prepayment. Individuals who claim the deduction aren’t permitted to prepay premiums that are otherwise due after 2007. The provision expires for any premium payment that’s paid or that accrues after Dec. 31, 2007.
Mortgage prepayment. If a mortgage (other than a VA, FHA, or RHS mortgage) is prepaid during 2007, the unamortized premium balance on that mortgage isn’t deductible. (The unamortized premium balance is the amount of premium that would have been paid in a particular year if the payments had extended throughout that year.)
Notification. The home owner is supposed to receive a statement from either the lender or the MI provider stating the proper amount of the MI deduction. That information will also be provided to the IRS.
It’s not known when or if the IRS will provide additional guidance for the deduction, given its one year authorization and limited applicability, NAR tax analysts say.