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Limit on Mortgage Tax Breaks Worries Some : But First Housing Bill in Six Years Provides for Permanent FHA Loan Insurance Program

December 27, 1987|DAVID W. MYERS | David W. Myers is a Times real estate writer

Under the old rule, a couple who bought their house for $30,000 20 years ago could only write off up to $30,000 in interest payments on a home-equity loan; now, they could borrow up to $100,000 and still write off all finance charges.

However, the new rule will hurt homeowners who could have borrowed more than $100,000 under the old rule and still write off all their interest charges because now those deductions will be limited by the new ceiling.

Owners of rental property emerged from the deficit-reduction package unscathed.

Real estate groups were successful in their efforts to kill a provision that would have ended the deferral of tax liability on gains from so-called "like-kind exchanges." In a like-kind exchange, an investor can swap his property for someone else's and defer paying taxes on any gain as long as the purpose for investing remains the same.

In addition, the new bill effectively eliminates a complex set of rules concerning installment sales that had been imposed on investors through last year's Tax Reform Act.

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