Republican Representative Vern Buchanan of Florida has introduced a new proposal aimed at helping homeowners in the state.
His plan seeks to bring back and permanently expand a tax benefit that offered relief to middle-class homebuyers by allowing them to deduct the cost of their mortgage insurance premiums.
Why This Matters
For many homebuyers, mortgage insurance is necessary when they can’t afford a 20 percent down payment. This applies to a lot of Americans, especially during the ongoing housing affordability crisis.
In 2020, over 361,000 homebuyers in Florida used mortgage insurance, according to a report from the Urban Institute. Data from the IRS reveals that year, middle-class families were able to deduct an average of $2,100 from their taxes thanks to a law that has since expired.
Background Information
Between 2007 and 2021, homeowners could claim a tax deduction for mortgage insurance premiums. However, this benefit ended in 2021. Representative Buchanan’s new bill, called the Middle Class Mortgage Insurance Premium Act, would bring back this tax break and improve it.
According to Seth Appleton, president of U.S. Mortgage Insurers, between 2007 and 2021, more than 44.5 million people used this deduction, collectively saving $64.7 billion. On average, qualifying taxpayers saved $1,454 annually. Appleton also pointed out that since the deduction expired, many low- and middle-income taxpayers have been left out of this benefit.
If passed, Buchanan’s bill would also increase the income limit for receiving this tax break from $100,000 to $200,000 per family. This change would make more people eligible for the benefit.
Details of the Proposal
The bill, officially called H.R. 2760, has bipartisan support. It is co-sponsored by 10 members of the U.S. House of Representatives, including three Republicans and seven Democrats. This mix of support highlights the widespread agreement on the importance of providing relief to homebuyers.
Representative Jimmy Panetta, the primary Democratic co-sponsor, said in a press release: “The costs of mortgage insurance make it harder for working families to buy homes. This bill would bring back the tax deduction for these costs and update income limits so more middle-class families can benefit.”
Republican Representative Scott Fitzgerald also praised the proposal, saying, “Owning a home is a key part of the American Dream, and middle-class families shouldn’t be penalized for pursuing it. This bill offers real tax relief for those burdened by the high costs of mortgage insurance.”
Current Challenges
Florida homeowners are dealing with rising housing costs, including property insurance and HOA (homeowner association) fees. On top of that, higher mortgage rates are making homeownership even harder to afford.
Economist Joel Berner of Realtor.com noted that out-of-state interest in Florida’s housing market has decreased in recent years, mainly because homes have become less affordable.
What’s Next?
If passed, the proposed tax deduction for mortgage insurance premiums could provide timely relief for homeowners, especially those struggling with the high costs of living in Florida.
It could also make buying a home more affordable for the middle class during a time when many are hesitant to enter the current housing market.
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