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Key Provisions of ‘Fiscal Cliff’ Deal Impacting Real Estate

Thu, Jan 10, 2013 at 9:50AM

With Congress passing and President Obama signing into law H.R. 8 (American Taxpayer Relief Act of 2012) to avert the so-called “fiscal cliff,” you may be interested in several provisions of the legislation that impacts housing.
The centerpiece of the measure permanently extends current income and capital gains tax rates for taxpayers with taxable income of up to $400,000 for individuals and up to $450,000 for couples. For individuals earning less than $400,000 and married filing jointly less than $450,000, marginal tax rates will stay the same as they have been over the last few years. Here’s a look at key real estate-related tax provisions included in the legislation:

  • Mortgage Cancellation Relief: One year extension of the Mortgage Debt Forgiveness Act until Jan. 1, 2014. This should help keep short sale, foreclosure and deed-in-lieu transactions moving. ALTA sent a letter a letter to members of Congress on Dec. 12 urging for this extension.
  • Mortgage Insurance Premiums: Itemized deduction for premiums paid for FHA or private mortgage insurance for filers making below $110,000.
  • Leasehold Improvements: 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties.
  • Energy Efficiency Tax Credit: The 10% tax credit (up to $500) for homeowners for energy improvements to existing homes.
  • Limits on Itemized Deductions: Rules limiting the value of itemized deductions (Pease Limitations) were permanently repealed for most taxpayers but will be reinstituted for individuals earning above $250,000 adjusted gross income and couples earning more than $300,000.
  • Capital Gains: The capital gains rate increased to 20 percent for high-income earners.
  • Estate Tax: The estate tax is now subject to a $5 million exemption in individual estates ($10 million for family estates) with a tax rate of 40 percent (up from 35 percent).

For more information about new tax provisions, contact your attorney or tax advisor.

With Congress passing and President Obama signing into law H.R. 8 (American Taxpayer Relief Act of 2012) to avert the so-called “fiscal cliff,” you may be interested in several provisions of the legislation that impacts housing.
The centerpiece of the measure permanently extends current income and capital gains tax rates for taxpayers with taxable income of up to $400,000 for individuals and up to $450,000 for couples. For individuals earning less than $400,000 and married filing jointly less than $450,000, marginal tax rates will stay the same as they have been over the last few years. Here’s a look at key real estate-related tax provisions included in the legislation:

  • Mortgage Cancellation Relief: One year extension of the Mortgage Debt Forgiveness Act until Jan. 1, 2014. This should help keep short sale, foreclosure and deed-in-lieu transactions moving. ALTA sent a letter a letter to members of Congress on Dec. 12 urging for this extension.
  • Mortgage Insurance Premiums: Itemized deduction for premiums paid for FHA or private mortgage insurance for filers making below $110,000.
  • Leasehold Improvements: 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties.
  • Energy Efficiency Tax Credit: The 10% tax credit (up to $500) for homeowners for energy improvements to existing homes.
  • Limits on Itemized Deductions: Rules limiting the value of itemized deductions (Pease Limitations) were permanently repealed for most taxpayers but will be reinstituted for individuals earning above $250,000 adjusted gross income and couples earning more than $300,000.
  • Capital Gains: The capital gains rate increased to 20 percent for high-income earners.
  • Estate Tax: The estate tax is now subject to a $5 million exemption in individual estates ($10 million for family estates) with a tax rate of 40 percent (up from 35 percent).

For more information about new tax provisions, contact your attorney or tax advisor.


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