The U.S. Senate passed a bill on Tuesday night that retroactively extends 55 tax provisions, among which are allowing deductions for mortgage insurance premium interest and tax relief on forgiven mortgage debt.
The tax provisions covered by the bill, known as the Tax Increase Prevention Act of 2014, expired on December 31, 2013. The bill provides for a retroactive one-year extension which expires on December 30 of this year and would be effective for those filing 2014 returns next year.
H.B. 5771, originally introduced by U.S. Representative Dave Camp (R-Michigan), Chairman of the House Committee on Ways and Means, on December 1, 2014, passed in the Senate by a 76 to 16 vote on Tuesday night. It passed on the House on December 3 by a vote of 387 to 46.
The Joint Committee on Taxation (JCT) estimates that extending the tax provisions for one year would reduce revenues by $44.8 billion over the 10 fiscal years from 2015 to 2024, according to a release by the Committee on Ways and Means.
About $3,143 of that revenue reduction would come from Section 102 of the new bill, according to JCT. This provision calls for the extension through December 30, 2014, for homeowners to exclude forgiveness of qualified mortgage debt (the remaining mortgage loan balance when a home is sold in a “short sale” to avoid foreclosure) from their gross income when filling out tax returns.
Section 104 of the bill allows taxpayers who own homes to count qualified mortgage insurance premiums as interest for the purpose of mortgage interest deduction on their tax returns. Taxpayers with an adjusted gross income of between $100,000 and $110,000, or half of that amount for married taxpayers filing separately, would be phased out ratably. The JCT estimates this provision will reduce revenues by $919 million for the 10-year period from 2015 through 2024.