Florida Homeowners Could See Tax Relief Under New Proposal

Republican Representative Vern Buchanan of Florida is trying to give homeowners in the Sunshine State tax relief under a legislation that would restore and permanently expand an expired tax deduction on mortgage insurance premiums for middle-class homebuyers.

"With housing prices skyrocketing in Florida and across the country, it's our responsibility to provide tax relief for middle-class families seeking to own a home," Buchanan said in a press release. "My bipartisan legislation will help make the American Dream of home ownership real for millions of Americans."

Newsweek contacted Buchanan's office for comment by email on Wednesday morning.

Why It Matters

Mortgage insurance is required for most homebuyers who cannot afford a 20 percent down payment—a category that covers many in America, especially as the country remains in the throes of a housing affordability crisis.

According to a study by the Urban Institute, more than 361,000 Florida homebuyers needed mortgage insurance in 2020. IRS data shows that, in the same year, middle-class homebuyers got an average mortgage insurance deduction of $2,100 thanks to a legislation that has since expired.

What To Know

Between 2007 and 2021, mortgage insurance premiums were tax deductible for these homebuyers, but the legislation expired in 2021. The bipartisan Middle Class Mortgage Insurance Premium Act would replace the original bill.

In the 14 years that the bill was in effect, the mortgage insurance premium deduction was claimed 44.5 million times, Seth Appleton, president of U.S. Mortgage Insurers (USMI), said in a recent press release, "representing a combined $64.7 billion in deductions for hardworking homeowners." That equals an average annual deduction of $1,454 per qualified taxpayer.

"Unfortunately, its expiration has deprived millions of low- and moderate-income taxpayers from benefiting from this deduction in recent years," Appleton said.

The new bill, officially known as HR 2760, would bring back the tax deduction and expand it to more taxpayers, according to Buchanan, by increasing the income limit from $100,000 to $200,000 per family.

The bill has 10 House co-sponsors—three Republicans and seven Democrats. The Republicans are Mike Carey of Ohio, Scott Fitzgerald of Wisconsin and Bryan Steil of Wisconsin; the Democrats are Jimmy Panetta of California (the bill's primary co-sponsor), Susan DelBene of Washington, Gwen Moore of Wisconsin, Sarah McBride of Delaware, Linda Sanchez of California, Brad Schneider of Illinois and Brad Sherman of California.

What People Are Saying

Representative Jimmy Panetta, in a press release: "The costs of mortgage insurance can make buying a home that much more difficult for working families. Our bill would make the mortgage insurance premium tax deduction permanent and update the income threshold so more middle-class homeowners can benefit. Despite today's challenging housing market, this type of fix to modernize this tax provision would help more Americans achieve and sustain home ownership."

Representative Scott Fitzgerald: "Homeownership is a cornerstone of the American Dream, and middle-class families shouldn't be penalized for pursuing it. I'm proud to co-sponsor the Middle Class Mortgage Insurance Premium Act to deliver real tax relief for Americans burdened by mortgage insurance costs. This bill is a smart, targeted way to support hardworking families and build on efforts to make homeownership more affordable."

Seth Appleton, president of U.S. Mortgage Insurers: "USMI strongly supports the Middle Class Mortgage Insurance Premium Act, common-sense legislation that would restore, make permanent, and expand eligibility for the tax deduction for mortgage insurance premiums."

Realtor.com Senior Economist Joel Berner, in a report: "In the past year or so, home shopping for properties in Florida by shoppers outside the Sunshine State has dwindled. Florida is getting less attention from home shoppers in other states than it was in previous years, and home affordability in the state seems to be the main culprit."

What Happens Next

The possibility of a tax deduction on mortgage insurance premiums would massively help many Florida homeowners facing rising housing costs, including property insurance premiums and homeowner association (HOA) fees.

These higher costs, together with elevated mortgage rates, are contributing to keeping buyers on the sidelines of the market despite growing supply across the state, cooling demand and pushing the state through a price correction.