We have some good and bad news if you have been thinking about purchasing or making improvements to a home. The bad news is that there were several significant tax breaks at risk of expiring at the end of 2016. The good news is that Congress has the ability to approve extensions for certain credits. It is important to educate yourself about all of these tax deductions to understand which ones you may still be able to take advantage of, both old and new.
To offer you some insight, following are few tax breaks that were set to expire at the end of 2016.
In 2014, Congress passed a bill that allowed qualified homeowners to get a tax break on the private mortgage insurance (PMI) they were paying on their homes. Many lenders required PMI in order to protect themselves if the buyer was unable to pay, so this tax deduction benefited a large number of homeowners. Unfortunately, this tax break was eliminated at the end of 2016. Homeowners can no longer write off the costs of their PMI.
In many instances, homeowners were required to claim a forgiven debt on a home mortgage as taxable for federal income tax purposes. Implementation of the Mortgage Forgiveness Debt Relief Act made it possible for qualified homeowners, who lost their homes to foreclosure or were eligible for a repayment adjustment, to not have to claim the forgiven debt as income on their tax returns. While Congress has renewed this tax break several times, it was still set to end at the end of 2016. However, if your tax debt was created in 2016, you can still complete the process into 2017 without having to claim the forgiven debt.
In years past, homeowners have been able to claim some of the costs of installing energy-efficient upgrades in their homes. Qualifying improvements included appliances, HVAC equipment, insulation, windows, doors, roofing, and more. Unfortunately, this tax benefit was also slated to end in 2016.
To make up for the benefits you are losing, now is the time to start researching potential real estate tax breaks for 2017.