short sales

Good News for Short Sale Sellers and How the Fiscall Cliff provisions affect you, your home and your taxes

Posted by Jenean Hill on January 3rd, 2013 | 0 comments

On January 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 EXTENDERS:

• Mortgage Cancellation Relief is extended for one year to January 1, 2014 (This is huge.  Many of you toward the end of the year did not consider short sale ing your home to reduce your financial burdons because you were concerned about income tax consequences.  Please talk to your tax advisor to have him firm that the coast is clear until the end of 2013.  With an abundance of buyers on the market, I can help you set up a quick and virtually seamless short sale transaction that retains privacy and peace of mind.)

• Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
• Leasehold Improvements. 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
• Energy Efficiency Tax Credit. The 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012. Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.

Capital Gains

Capital Gains rate stays at 15% for those the top rate of $400,000 individual and $450,000 joint return. After that, any gains above those amounts will be taxed at 20%. The 250/500k exclusion for sale of principle residence remains in place.  (Chances are you fall into the 15% category, so if you need to sell an investment property this year, the extra 5% capital gains tax wont affect you.)

Estate Tax

The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent. The exemption amounts are indexed for inflation.