Provision eliminated late in process
By ANNE LINEBERRY
5/28/2003

Congress was poised last week to give homeowners a break on a common mortgage fee. However, the final version of tax-cut legislation didn't include the measure, which would have eliminated income tax on mortgage insurance for many people.

Senators Blanche Lincoln (D-Ark.) and Gordon Smith (R-Ore.) cosponsored S-846, also known as the "Mortgage Insurance Fairness Act." The legislation would have allowed some homeowners to deduct premiums paid for mortgage insurance under specified conditions.

Private mortgage insurance and similar plans offered by the Federal Housing Administration, the Rural Housing Administration and the Veteran's Administration were part of the bill, which exempted from income tax all insurance premiums paid for that income year.

Individual filers with an income greater than $110,000 would not be eligible for the deduction and filers with incomes between $100,000 and $110,000 would be treated on a sliding scale, losing 10 percent of the deduction for each $1,000 made over the $100,000 maximum allowable income for full tax benefit. For those married filing separately, the sliding scale starts at $50,500, with 10 percent in that instance; each $500 in extra income would correspond to another 10 percent decrease in the total premium available for the tax exemption. Only filers who itemized their deductions would be able to take advantage of the law.

The bill was added on to the behemoth tax-cut package Congress has been debating.

It disappeared during the last bicameral fine-tuning before the bill narrowly passed Friday, with Vice President Dick Cheney casting the deciding vote. Senator Lincoln voted against the final bill, in part because this proposal had been removed, a spokesman from her office said.

The Senate bill is technically not yet dead, but Sen. Lincoln's press liason said there were no immediate plans for further action on the measure.

Over in the House, lawmakers have been busy working on the same idea. Rep. Paul Ryan (R-Wisc.) introduced a similar bill in March. He already has 39 bipartisan cosponsors. Their bill has been referred to the House Ways and Means Committee and awaits further action, yet to be scheduled.

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