Real Estate Provisions in “Fiscal Cliff” Bill
On Jan. 1 both the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff.” The bill will be signed shortly by President Barack Obama.
Below are a summary of real estate related provisions in the bill:
REAL ESTATE TAX EXTENDERS
• Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014. This means homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.
• Deduction for Mortgage Insurance Premiums for filers making below $100,000 is extended through 2013 and made retroactive to cover 2012. The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual mortgage insurance premiums.
• 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
• The 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012. Homeowners can receive tax credits for making energy-saving improvements to their home, such as new windows and doors, roofing, insulation, HVAC, water heaters and biomass stoves.
Capital Gains. Taxes on capital gains and dividends will be held at their current levels of 15 percent for individuals making less than $400,000 and households with income of less than $450,000. They will rise to 20 percent for individual taxpayers and for households above those thresholds.
Estate Tax. The estate tax will rise to 40 percent from its current 35 percent level, with the first $5 million in assets exempted. The tax law only provides a limited number of deductions that reduce the gross estate’s value. These deductions include funeral expenses, payments to satisfy outstanding debt, the value of the property intended for donation after death.
Please remember, I am NOT a tax advisor. I assist people in buying and selling their homes. If you have any tax questions consult your tax advisor. If you are thinking of buying or selling your home- contact me! I am an expert in that field.
Happy New Year!