On New Year's eve Congress passed the American Taxpayer Relief Act of 2012. Included in this dense bill are two items of interest for residential real estate.
1. EXCLUSION FROM INCOME OF CANCELLATION OF DEBT ON QUALIFIED PRINCIPAL RESIDENCE Section 202:
Forgiven debt from a loss on the foreclosure or short sale of a primary residence may not be taxed through December 31, 2013, assuming the taxpayer meets the requirements in IRC 108. It is standard for individuals to pay taxes on the "income" from forgiven debt. This possible exemption has made short sales more attractive to individuals who have to sell even through their home would sell for a loss in the current market.
2. MORTGAGE INSURANCE PREMIUM DEDUCTION Section 204:
Qualified mortgage insurance premiums paid through 2013 may be ducted from personal taxes per IRC 163(h)(3)(E).
For more details and a Friday seminar on the tax changes check out the Arizona Society of CPA's blog on the topic : http://ascpa.wordpress.com/2013/01/01/american-taxpayer-relief-act-of-2012-first-look-at-provisions/
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