2010 Federal Income Tax Home Mortgage Interest Deductions Were Down $104 Billion/21% From 2007 Peak.

The Excel table embedded below from my Excel Public SkyDrive folder shows comparisons of home mortgage interest deductions from 2004-2010 taken from federal individual tax returns. (Direct link to Excel file is HERE).

Observations:

Compared to Peak Year of 2007, in 2010:

1. The 36.8 million returns that claimed the home mortgage interest deduction was a reduction of 10% and a reduction of nearly 3.9 million returns from the nearly 40.8 million returns that claimed the deduction in 2007.
2. The total number of returns (with or without mortgage deductions) was a reduction of 4% (more than 5 million fewer returns). 
3. The total amount of home mortgage interest deduction claimed [$387 billion] was down by 21% ( $104 billion) from the $491 billion claimed in 2007.
4. The $10,497 average amount of home mortgage interest deduction per return (where the deduction was claimed) was down by 13% (-$1,555).

Note: Data taken from Table 1 found on PDF page 176 of SOI Bulletin (link to Bulletin is in the Excel file).

Originally created and posted on the Oregon Housing Blog.

Homebuyer Tax Credit Extension Cost: $16.7 Billion; My Estimate of TOTAL Federal FY 2009 Home Ownership Subsidy Cost is $512 Billion.

WSJ story about extension cost is HERE.

Extension Senate Bill is S.1678, (I don't yet see an official CBO scoring for that bill).

Below is a PARTIAL listing of FY 09 federal home ownership subsidies, with links to the source document that contains the estimate.

Cost (Billions)	Use
$ 512.9	Total
$ 11.2	Cost of existing home ownership tax credit through mid September @1.4 million users X $8,000.
$ 16.7	Projected Cost of Home ownership Tax Credit Extension.
$ 290	FY 09 estimate for Fannie and Freddie.
$ 75	Estimate of costs for HAMP (Loan Refinance and Modification).
$ 120	Annual home ownership subsidies for mortgage interest and property tax deductions. (see footnote at bottom of page 17).

NOTES:

1. Subsidies for homeowners are NOT just a federal phenomena. My post HERE shows that homeowners get 91% of all housing tax subsidies from the State of Oregon.
2. HAMP costs shown above include multiyear totals; Fannie Freddie estimate may contain some multifamily related costs and costs are reduced in future fiscal years ($25 Billion in FY 2010 instead of $290 Billion in FY 2009).
3. Additional TARP costs associated with fixing financial institution problems caused by single family loan problems are NOT included.
   

Originally created and posted by the Oregon Housing Blog.

Mortgage Debt Relief Forgiveness IRS Guidance Update.

I blogged a month ago HERE about the failure of IRS to update their Question and Answer web page on mortgage debt forgiveness.

I subsequently wrote to Senator Smith to ask IRS for an explanation and appreciate his staff follow up to my inquiry. Today I received a reply from IRS providing a NEW web page HERE that explains how the IRS form 982 is to be completed. (IRS has still NOT updated the Questions and Answers page).

From the new web page, I have extracted and pasted below the relevant information on how to complete the Form 982 and how the taxpayer is notified of the amount forgiven by their lender (via form 1099-C).

"Do I have to complete the entire Form 982?
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness.

If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2.

If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Attach the Form 982 to your tax return.

How do I know or find out how much was forgiven?
Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or cancelled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982."

IRS Updates Form 982: Reduction of Tax Due to Discharge of Debt.

A WSJ Story indicates that new a new PDF version IRS Form 982 (Feb. 08) has been posted on the IRS website HERE. This form, which includes some instructions, allows filers to write down a portion of mortgage debt, under certain conditions as provided by the Mortgage Forgiveness Debt Relief Act of 2007.

However, the IRS Debt Relief main Questions and Answers web page on Foreclosure and Debt Relief HERE indicates that written guidance found on that page is NOT yet updated to reflect mortgage relief, and the updated Form 982 is not even listed on that page as of this afternoon. [I recommend that those interested check this Q and A IRS page frequently for updates, as they should be coming soon].

An earlier post this year on this blog HERE pointed out that the IRS Advocate had identified problems with the IRS implementation of the Mortgage Forgiveness Debt Relief Act of 2007. The post concluded: "This absence of assistance and the scattered complexity of guidance clearly will force many taxpayers with cancellation of debt to pay for the services of a tax professional."