Great news! Not only did the US Congress avoid a plunge over the fiscal cliff, but the National Association of Realtors was instrumental in avoiding some of the possible tax increases and deduction eliminations that would have hampered the real estate recovery. I’ve written about the fiscal cliff and possible elimination of the MID, so I won’t rehash the details, but do know how grateful I am to each and every colleague and client who contacted their Representatives and helped keep the NAR’s position front and center in their minds.
The NAR believes strongly that a full economic recovery is only possible with a revitalized real estate sector leading the way and while there is still much work to do, we’re on our way! Mortgage Cancellation Relief was extended for one year to January 1, 2014. Hopefully this will never affect you, but if a homeowner is selling a home through a short sale, they now have an additional year to sell their home without being penalized for the debt that was forgiven. Deductions for Mortgage Insurance Premiums was extended through 2013 for filers making below $110,000 and also made retroactive to cover 2012. The 10% tax credit for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.
Even more significant, “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for 99% of taxpayers. The limitations will only apply to individuals earning more than $250,000 or joint filers earning more than $300,000. Capital Gains rates hold steady at 15% for those at the top rate of $400,000 for individual and $450,000 for joint filers. After that, any gains above those amounts will be taxed at 20%. The $250,000/$500,000 exclusion for the sale of a principal residence remains in place. Lastly, the first $5,000,000 in individual estates and $10,000,000 for family estates are now exempted from the estate tax.
Again, thank you for answering the NAR’s Call to Action. Protecting the most important and significant investment many of us will ever make, our homes, is a great way to start the new year!