CIMA’s annual reminder to claim tax credits for those who made insulation and other energy efficient improvements to homes in 2013 comes with a footnote. This may be your last year for those and other important homeowner related tax deductions!
News broke in March about legislation being proposed by Rep. Dave Camp of Michigan, the chairman of the House Ways and Means Committee, that could lead to a major hit to some of the most popular tax benefits to homeownership. His major tax reform bill includes a hefty list of long-standing homeowner tax benefits that would be eliminated or sharply reduced.
This could mean that the Energy Tax Credits restored for 2013 by the White House that millions of homeowners are currently filing for by April 15, 2014 may once again be on the chopping block. Camp’s legislation would totally eliminate the credit for energy-saving improvements. But it goes even further effectively gutting what have been heretofore considered politically sacrosanct tax benefits to homeowners:
- basically phase out the mortgage interest deduction
- drastically reduce capital gains exclusions for profits on sales of primary homes
- end fed tax exemptions for state/municipal bond programs to fund mortgages for low-income families
- eliminate penalty-free withdrawals from IRAs to help fund first-time home purchases
- end all deductions for local property taxes
The push for a balanced budget is certainly important. However, steps to achieve this that diminish the desire for and benefits of owning a home, and the benefits of making energy-improvements to millions of older homes, is counter productive. Homeownership is a huge driver of the U.S. economy. More importantly, the drag on the economy of heating and cooling poorly insulated homes far outweigh the costs of the federal credits.
This bill is not likely to pass in an election year like 2014. However, it does set the stage for continued consideration in 2015 once a new congress is in place. Homeowners should make a point of speaking loud and clear to the congress about the need for keeping these important benefits of owning a home in place.