Boosting Equity for the American Middle Class Act of 2016

“36C. Early principal payments on certain home mortgages

“(a) In general—In the case of an individual, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to 50 percent of the excess home mortgage principal payments made by the taxpayer during such taxable year.

“(b) Annual dollar limitation—The credit allowed under subsection (a) with respect to any taxpayer for any taxable year shall not exceed $500.

“(c) Lifetime limitation—No credit shall be allowed under subsection (a) to any taxpayer for any taxable year if credit was allowed under subsection (a) to such taxpayer for any 10 preceding taxable years.

“(d) Limitation based on modified adjusted gross income

“(1) In general—The amount which would (but for this paragraph and after the application of subsection (b)) be allowable as a credit under subsection (a) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so allowable as—

“(A) the excess of—

“(i) the taxpayer’s modified adjusted gross income for the taxable year, over

“(ii) $125,000 (twice such amount in the case of a joint return), bears to

“(B) $10,000 (twice such amount in the case of a joint return).

“(2) Modified adjusted gross income—The term “modified adjusted gross income” means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.

“(e) Excess home mortgage principal payments—For purposes of this subsection—

“(1) In general—The term “excess home mortgage principal payments” means, with respect to qualified home mortgage indebtedness for any taxable year, the excess of—

“(A) the aggregate amount of principal paid by the taxpayer with respect to such indebtedness during such taxable year, over

“(B) the aggregate amount of principal which would have been paid by the taxpayer with respect to such indebtedness during such taxable year if the taxpayer had timely made each required payment under the terms of the indebtedness during such taxable year (and no other payments).

“(2) Qualified home mortgage indebtedness

“(A) In general—The term “qualified home mortgage indebtedness” means any acquisition indebtedness (as defined in section 163(h)(3)(B)) if—

“(i) the residence with respect to such acquisition indebtedness is the primary residence (within the meaning of section 121) of the taxpayer, and

“(ii) such indebtedness constitutes a traditional mortgage.

“(B) Traditional mortgage—For purposes of this paragraph, the term “traditional mortgage” means indebtedness—

“(i) the term of which is not less than 15 years and not more than 30 years, and

“(ii) the required payments under which are each the same amount and made in equal intervals during the term of the indebtedness (or if any payment is required at a different interval, the amount of such payment is adjusted in the same proportion as the change in interval).

“(f) Rules related to joint returns

“(1) No credit for married individuals filing separately—In the case of a married individual, no credit shall be allowed under this section for any taxable year unless such individual files a joint return with such individual’s spouse for such taxable year.

“(2) Application of lifetime limitation with respect to joint returns—If the credit under subsection (a) is allowed with respect to a joint return for any taxable year, such credit shall be treated for purposes of applying subsection (c) as allowed to both spouses for such taxable year. For purposes of applying subsection (c) with respect to a joint return for any taxable year, the taxpayer shall be treated as having been allowed the credit under subsection (a) for 10 or more preceding taxable years only if both spouses have been so allowed such credits.”

“(D) the amount of excess home mortgage principal payments (as defined in section 36C(e)) received with respect to such mortgage during the calendar year, and”