Housing Provisions Under the New Tax Law

In December, President Obama signed into law the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010." Although most of the publicity over this bill dealt with the extension of the income tax cuts established during President Bush's time in office, the bill also dealt with several tax provisions that affect housing issues. Here are the key points:

• A $2,000 tax credit for home builders that build highly energy efficient homes was extended (retroatively for 2010 and also for 2011).
• Private mortage insurance (PMI) will continue to be tax deductible on mortgages taken out after December 31, 2006 for those making less than $100,000 a year. The deduction is phased out for people making between $100k and $110k, and those making more than that are no eligible for the deduction.
• Perhaps the most popular tax credit program, which gave up to $1,500 for energy efficient remodel projects, was extended, but in sharply reduced form. The credit is currently maxed at $500, which includes any credit claimed on previous years taxes. So, if you claimed the full credit on last year's taxes, you would not be eligible for any credit on this year's. Furthermore, the credit is now only 10% of the cost of material (previously this was 30%). Other items, such as fans, hot water tanks, and HVAC components have a fixed dollar amount.

If you have questions about how any of these provisions might affect you, talk to your tax preparer or accountant.