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About Real Estate: Congress ponders big new tax breaks for renters

A proposal on Capitol Hill would allow renters to deduct their monthly payments, much as homeowners currently do.

DEAR MR. MYERS: Is it true that the federal government is going to allow apartment renters to start deducting their monthly rent payments on their tax returns?

ANSWER: A measure recently introduced on Capitol Hill would do just that, but its chances of passing anytime soon are murky at best.

The bill is authored by Rep. Alan Grayson, D-Fla. It would allow tenants to deduct their rental payments on their federal income-tax returns, much in the same way that homeowners are currently able to write off their annual mortgage-interest charges.

Grayson and the measure’s other backers say it would provide much-needed relief to tens of millions of Americans, many of whom live in areas where rents have been skyrocketing. A tenant paying $1,500 per month and in the standard 25 percent federal tax bracket would save $4,500 per year if the plan is approved and signed into law, Grayson adds.

Critics of the bill, though, note that many states already provide special tax breaks or other types of help to renters, especially those who don’t earn much money or are elderly. They also say that it could hurt the overall housing market and perhaps even push home prices lower by reducing the tax incentives renters often cite when planning to purchase their first house.

Linda Couch, a senior vice president at the nonprofit National Low Income Housing Coalition, admits that the proposal’s chances of being approved anytime soon are fairly slim. Most such bills rarely pass on their first go-round, she said.

More cynical observers also note that 34 seats in the U.S. Senate and all 435 in the House of Representatives are up for grabs this year, and many lawmakers are too busy focusing on getting re-elected to approve any meaningful legislation.

But if the bill can beat its long odds and become law, Couch says, it could actually boost the housing market rather than hurt it.

“It could help renters who are looking to become homeowners, because it will lower their [current] housing costs,” Couch said in a recent interview. “That savings could be put toward a down payment.”

DEAR MR. MYERS: We bought our first home in November 2014 and prepaid our property-tax bill when the deal closed. Now we have just realized that we didn’t claim that 2014 property-tax payment on the federal income-tax return that we filed last April. Can we file an amended return now to get a refund, or is it too late?

ANSWER: No, it’s not too late to file an amended return and get some money back.

The Internal Revenue Service generally allows taxpayers who missed out on a money-saving tax break to file an amended return — and thus reclaim part of their money — up to three years after the return’s original filing deadline.

Your letter states that you filed your most recent return last April, so you have until April 2018 to file an amended return to claim your overlooked deduction from 2014.

Start by getting a copy of IRS Form 1040X, Amended U.S. Individual Income Tax Return, by calling the agency at 800-829-3676 or by downloading it from .irs.gov. It’s a fairly straightforward document, but the IRS will contact you by mail — never by phone or the Internet — if it needs additional information.

Though the IRS recently promised to get most refunds for the 2015 tax year out within 21 days after the proper paperwork is received, an agency spokesperson says it usually takes three or even four months to process a refund for previous years. But while you’re waiting, double-check the forms you filed for your 2014 state income taxes, too: If the IRS owes you some more money, there’s a good chance that the state also does.

REAL ESTATE TRIVIA: The IRS says it processed more than 147 million individual tax returns in fiscal 2014, the latest figures available. About 69 percent of taxpayers took the flat-rate standard deduction rather than choosing to itemize.

DEAR MR. MYERS: I filed for bankruptcy in January of last year, but the local courts are swamped and the case was discharged only a few weeks ago. When will the bankruptcy drop off my credit record?

ANSWER: Credit bureaus base their bankruptcy-related records on the filing date, not the discharge date. So, if you filed for Chapter 7 — a so-called “straight bankruptcy,” where no debts are repaid — it’ll stay on your record for 10 years. You filed in January 2015, so it won’t disappear until the start of 2025.

If you instead filed for Chapter 13, which calls for repaying at least some of your debt, it’ll stay on your record for seven years from the initial filing date.

David W. Myers’ column is distributed by Cowles Syndicate Inc.

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