As the new year began, the U.S. Senate and House of Representatives were busy passing legislation to avert the so-called “fiscal cliff” with a bill that is quite favorable toward the housing industry. This is great news for those in the market to buy and/or sell a home. An outline of the bill’s real estate provisions from the National Association of Realtors follows.
Several real estate tax breaks and credits have been extended, most notably:
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Mortgage cancellation relief for homeowners or sellers who have a portion of their mortgage debt forgiven by their lender, typically in a short sale or foreclosure sale for sellers and in a modification for owners, is extended for one year to Jan. 1, 2014. Without the extension, any debt forgiven would be taxable, which, for underwater households, represents a financial burden.
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For filers making below $110,000, the deduction for mortgage insurance premiums is extended through 2013 and made retroactive to cover 2012.
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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.
In addition, the tax exclusion for gains on the sale of a principal residence remains in effect for sellers, so only home sellers whose income is $450,000 or above and the gain on the sale of their house is above $500,000 would pay taxes on the excess capital gains at the higher rate (with corresponding numbers for individual filers).
