Tax relief for foreclosures, but not McMansions

from www.bankrate.com




Tuesday, Aug. 28Posted 8 a.m. EDT
Tax relief for foreclosures, but not McMansions
Congress is still on its annual summer break for a few more days, but some tax proposals are worth reviewing before they get back in town.
First, foreclosure relief that was introduced last spring; April 17, tax-filing day to be exact. Don't you just love the showmanship aspect of Capitol Hill?
But the bill, its pointed introduction date notwithstanding, has some merit. It's the Mortgage Cancellation Tax Relief Act of 2007 (HR 1876), sponsored by Rep. Robert E. Andrews, D-N.J. A month later on the other side of Capitol Hill, Sen. Debbie Stabenow, D-Mich., introduced an identical version, S. 1394.
Both measures would amend the tax code to make debt forgiveness on principal home mortgages nontaxable income.
Since the bills were dropped in the hoppers, however, they have been languishing. Not even a subcommittee hearing has been scheduled by either the Ways and Means or the Senate Finance committees.
But given what's going on in the mortgage, and tax, world right now, as discussed in this Bankrate story on the double whammy of losing your home then owing taxes, that might change.
No deduction for McMansion mortgages: Congress also is looking for ways to combat greenhouse gasses. Insert your own Washington, D.C., joke here.
Kidding aside, a veteran lawmaker thinks he's come up with a solution that also could put more tax dollars in the U.S. Treasury.
According to real estate columnist Ken Harney, when Congress reconvenes next month, Rep. John D. Dingell, D-Mich., will introduce comprehensive climate-change legislation that would, in part, in the lawmaker's own words, "remove the mortgage interest deduction on McMansions -- homes over 3,000 square feet."
I don't think Dingell's idea has much chance of passing. Or maybe I hope it doesn't, since our house here in Austin, Texas, is a tad bigger than 3,000 square feet. Yep, it's true. Everything's bigger in the Lone Star State.
No word from the representative or his staff as to why the cutoff point of 3,000 square feet was chosen. But big houses are a general target because they tend to contribute more to greenhouse gas emissions via heating, cooling, electrical usage and building materials.
Personally, I've lived in smaller houses (in other states, of course) that were older and much less energy efficient than the place my husband I now call home. Many others who will oppose Dingell's proposal will make that same argument.
We'll also hear from the powerful real estate and lending lobbies, which are still taking hits thanks to the largely self-inflicted subprime debacle. Those folks definitely don't want to see things get difficult, taxwise, for folks who can afford to take out big mortgages for big houses.
There's also the greenhouse gas/global warming issue. It's so politically divisive that with the makeup of Capitol Hill now, expect most Republicans, who own their share of big houses, to come down squarely against the bill.
Finally, there's the sacredness of the mortgage interest deduction itself. Even Dubya's blue ribbon panel charged with coming up with tax reform proposals was shot down, in part, because it called for the elimination of the mortgage interest deduction.