Legislation Would Restore Expired Tax Deduction for Middle-Class Homebuyers, Update Accounting Practices for Condo Construction
Over 360,000 Florida Homebuyers Used Mortgage Insurance (2020)
WASHINGTON — Today, Congressman Vern Buchanan, Vice Chairman of the House Ways and Means Committee, introduced two pieces of legislation to expand access to housing, cutting taxes for middle-class homebuyers and updating accounting practices for new condominium construction.
Co-led by Rep. Jimmy Panetta (D-Calif.), the bipartisan Middle Class Mortgage Insurance Premium Act would restore and permanently extend the mortgage insurance tax deduction and expand the deduction to more taxpayers by increasing the income limit from $100,000 to $200,000 per family. According to the Urban Institute, over 360,000 Florida homebuyers used mortgage insurance in 2020.
“With housing prices skyrocketing in Florida and across the country, it’s our responsibility to provide tax relief for middle-class families seeking to own a home,” said Buchanan. “My bipartisan legislation will help make the American Dream of home ownership real for millions of Americans.”
“The costs of mortgage insurance can make buying a home that much more difficult for working families,” said Rep. Panetta. “Our bill would make the mortgage insurance premium tax deduction permanent and update the income threshold so more middle-class homeowners can benefit. Despite today’s challenging housing market, this type of fix to modernize this tax provision would help more Americans achieve and sustain home ownership.”
Most homebuyers who cannot make a 20 percent down payment are required to buy mortgage insurance. Between 2007 and 2021, homeowners could take a tax deduction for premiums paid on mortgage insurance. In 2020, middle-class homebuyers got an average mortgage insurance deduction of $2,100 according to IRS data, but this tax cut expired in 2021.
Buchanan’s bill is cosponsored by Reps. Mike Carey (R-Ohio), Susan DelBene (D-Wash.) Scott Fitzgerald (R-Wis.), Gwen Moore (D-Wis.), Sarah McBride (D-Del.), Linda Sanchez (D-Calif.), Brad Schneider (D-Ill.), Brad Sherman (D-Calif.) and Bryan Steil (R-Wis.)
“Homeownership is a cornerstone of the American Dream, and middle-class families shouldn’t be penalized for pursuing it. I’m proud to co-sponsor the Middle Class Mortgage Insurance Premium Act to deliver real tax relief for Americans burdened by mortgage insurance costs,” said Rep. Fitzgerald. “This bill is a smart, targeted way to support hardworking families and build on efforts to make homeownership more affordable.”
Buchanan also introduced the Fair Accounting for Condominiums Act to exempt high-rise condominiums from the percentage of completion method of accounting, which currently creates burdensome federal income tax issues for condominium developers.
“As millions of Floridians know, condos provide a great opportunity for low and middle-income families to enter the housing market,” said Buchanan. “We should be making it easier, not harder, for condo developers to build multi-unit condos, which will increase the housing supply for those most impacted by the nationwide housing crisis.”
While high-rise condominiums receive customer deposits while they are under construction, they do not receive the balance of the purchase price until closing. However, under the percentage of completion method of accounting, the IRS requires condominium developers to pay income taxes as construction progresses, as opposed to when the balance is fully paid. This can create significant taxable income with no cash available to pay the taxes.
In 1988, Congress exempted most home construction contracts from the percentage of completion method. The exemption, as currently written, does not extend to high-rise condominiums.
Buchanan has championed policies that support homeownership during his time in Congress. He previously introduced the Middle Class Mortgage Insurance Premium Act in the 118th Congress. He also previously introduced the Fair Accounting for Condominium Construction Act in both the 117th and 118th Congress.
