Q: Earlier this year, you wrote that Congress is thinking about cutting back on the tax deductions that homeowners can take. What is the status of those plans? What would happen to the housing market if write-offs for homeownership are reduced?

A: Several proposals to drastically scale back the various deductions that homeowners can claim are beginning to take shape on Capitol Hill. Nearly all of them could send home values tumbling, and perhaps even push the nation into a long recession, many experts say.

Most of the preliminary plans being floated today are based on the recommendations that a special tax-advisory panel made to Congress last month. For starters, the panel said that the current deduction for mortgage-interest payments should be abolished and replaced with a new tax-credit program: Analysts say the scheme would force millions of middle-income homeowners (especially those in high-cost urban areas) to pay thousands of dollars a year more to the Internal Revenue Service.

In addition, the panel recommended eliminating the annual property-tax deduction that all homeowners and rental-property investors can take. It also suggested ending tax breaks for home-equity loans and second homes.

Some lawmakers have warmly embraced the advisory panel’s suggestions – they are particularly popular among liberals who feel that property owners should not be “entitled” to tax breaks that are unavailable to renters, people who live in government-subsidized housing or those who are homeless.

In contrast, many moderate and conservative legislators – as well as most housing experts – have rejected most or all of the panel’s ideas. They note that many current owners couldn’t afford to keep the homes they have today if it weren’t for the money-saving tax breaks they currently enjoy: Stripping away those deductions could quickly cause prices to fall by as much as 20 percent and could push many hardworking Americans into foreclosure.

Eliminating the tax breaks also would make it even harder for first-time buyers to purchase a home, which in turn could trigger a sharp downturn in construction and the loss of potentially millions of jobs in every facet of the housing industry.

Add it all up, and it’s easy to see why so many economists agree that tinkering with the current set of housing deductions could cause economic disaster down the road.

Fortunately, organizations ranging from consumer groups to housing trade associations are beginning to mobilize against the proposed tax changes. Their opposition should prevent Congress from approving large-scale reforms soon, but lingering concern over what might happen in the long run will add even more uncertainty to a housing market that already faces its share of challenges in the year ahead.

Q.: I made a full-price offer on a home, but the seller rejected it and asked for $5,000 more. I refused to meet his demand for the extra money. Can I sue the seller because he turned down my full-price offer?

A.: You can sue, but it’s doubtful you would win. Sellers are never obligated to follow through with a transaction, even if a buyer offers full price, unless there’s a purchase contract that is signed by both parties.

Though you offered to pay the seller’s full asking price, he never accepted your offer and therefore has no legal obligation to sell his home to you.

Q.: My husband and I purchased a duplex in 1998 and have lived in one unit while renting out the other. Now we are ready to sell. How will our profit be taxed, considering that the property is both our personal residence and a rental?

A: Your letter states that you have lived in one of the units since 1998. Because it has been your primary residence for at least two of the past five years, you and your spouse qualify to keep up to $500,000 of the profit attributable to the sale of that particular unit tax-free. (The limit would be $250,000 if you were single.)

The second unit – the one that has been rented by tenants – falls under the IRS’s more complex rules for rental-property investments. You will owe capital-gains taxes on the net profit attributed to the sale of the rental, but the figure is going to be particularly difficult to calculate if you have made improvements to the unit over the years or if you have been taking special “depreciation” tax write-offs available only to income-property investors.

Because the sale of your duplex raises a host of complicated tax issues, it’s imperative that you consult with an accountant or similar professional immediately. A good accountant will help you keep as much profit as possible away from the clutches of the IRS.

– David W. Myers is a 20-year veteran of the newspaper and magazine business, having previously covered real estate for the Los Angeles Times and Investor’s Business Daily.