The Iowa Finance Authority has opened a program that will allow some Iowans to claim a credit, rather than a deduction, for mortgage interest. From an IFA press release:
The Iowa Finance Authority has announced that eligible Iowans may buy a home and reduce their federal income tax liability by up to $2,000 a year for the life of their mortgage.
The 2014 Take Credit Mortgage Credit Certificate program will be available beginning this week through IFA Take Credit Program Participating Lenders. Approximately 585 Iowa home buyers are expected to benefit from the program.
It has been some years since these credits were available in Iowa.
The credits aren’t for everyone. They are targeted to lower-income borrowers, with income limits varying by county. IFA has a “quick check” page for users to determine eligibility. But for those who qualify, they are a handy way to reduce mortgage costs. The credit is claimed on Form 8396.
TaxProf, TRAC: IRS Criminal Prosecutions Up 23.4% in Obama Administration. This is probably due to the explosion in tax-refund theft that was less of a priority than regulating preparers was for the Worst Commissioner Ever and the Obama Administration.
Cara Griffith, The Myth of the Budget Surplus (Tax Analysts Blog):
There seems to be a lot of good news about state budgets lately. Newspaper headlines have changed from doom and gloom over budget crises during the recession to questions about how states will manage budget surpluses. Unfortunately, there are financial problems lurking beneath the surface, and one of the largest may be the underfunding of state and local government pension and healthcare plans.
Even Iowa’s relatively well-funded pension plan is 20% underfunded actuarially, and even that uses an absurd assumption of 7.5% investment returns. The Taxpayers Association of Central Iowa has a lengthy, but excellent, analysis. Public defined benefit plans are a lie. They are a lie to taxpayers understating the cost of current pension accruals, a lie to public employees about what they will get after retirement, or both.
Elaine Maag of TaxVox raises Questions About Expanding the Childless EITC:
The EITC is often criticized for its built-in marriage penalty. Imagine a single mom with three kids who earns $17,500. Prior to marriage, she qualifies for the maximum credit of $6,143. But if she marries someone with identical earnings, the additional income will reduce her EITC to just $3,670.
If the childless EITC were expanded and the husband had his own EITC, he would lose all or part of his benefit when the couple married, magnifying the tax increase this couple would face relative to when they were not married. As long as the EITC phases out at higher incomes and is tied to joint income, this will remain an issue.
Jana Luttenegger, Expired Housing-Related Tax Rules (Davis Brown Tax Law Blog). The exclusion for forgiven mortgage debt is the biggie.
William Perez, Finding the Right Filing Status. If you are legally married, it’s either joint returns or married filing separate. Single status is unavailable, even for same-sex couples married in a state that allows them to get married who live in a state that doesn’t. William provides some excellent explanation.
Janet Novack, IRS: Don’t Call Us, Look It Up On IRS.Gov. Well, you might actually get a correct answer that way.
TaxProf, The IRS Scandal, Day 273
Howard Gleckman, The Cruel Political Paradox of Deficit Reduction (TaxVox)
Carl Smith provides Another Update on Rand Cases in Tax Court at Procedurally Taxing. The Rand cases hold that an “underpayment” for purposes of penalties does not include the portion of refundable tax credits that tax tax below zero.