Fiscal cliff deal preserves key housing tax breaks
The U.S. housing market stands to benefit from two tax provisions that were left alone in the hasty budget compromise that Congress reached yesterday, CNBC reported. In seeking to avert the fiscal cliff, federal lawmakers opted not to touch the mortgage-interest deduction and extended tax relief on mortgage debt forgiveness for a year.
President Obama had tweeted in the heat of the fiscal cliff debate that mortgage-interest deductions could hit the chopping block if Republicans didn’t agree to raise taxes on America’s wealthiest individuals. Mortgage-interest deductions are a nearly $100 billion-per-year revenue drain for the U.S. Treasury, according to syndicate real estate columnist Kenneth Harney, but some real estate experts feared that eliminating the tax break would have a deep impact on the housing market.
As for the tax break, “an extension of the tax break is positive for home values by reducing the number of foreclosures and helping more troubled borrowers stay in their homes,” Jaret Seiberg of Guggenheim Partners told CNBC. “That means less supply on the market.”
Observers were concerned that without the debt forgiveness tax break, homeowners would not consent to short sales, as they would have received a tax bill. [CNBC] –Zachary Kussin