Debt forgiveness act extended

By
Real Estate Agent with Keller Williams Sandpoint rain@lakeandhomes.com SP36782

 

 

For those of you in a facing a foreclosure, principle reduction,   deed-in-lieu of foreclosure,  or short sale. on your home, the debt forgiveness act of 2007 has been extended for another year.

Under the IRS tax code forgiven debt was treated as income subject to federal income tax.  Homeowners who get their mortgage debt forgiven through a short sale, deed-in-lieu or loan modification will not be taxed on the debt forgiven on the amount forgiven up to $2,000,000. 

On Jan. 1 both the Senate and House passed H.R. 8 legislation to avert the “fiscal cliff.” The bill was signed into law by President Barack Obama on Jan. 2.  Below is a summary of real estate related provisions in the bill:

Real Estate Tax Extenders

       Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014

       Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012

       15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012

       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 Permanent Repeal of Pease Limitations for 99% of Taxpayers Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.  These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000.  These thresholds have been increased and are indexed for inflation and will rise over time.  Under the formula, the amount of adjusted gross income above the threshold is multiplied by 3 percent.

That amount is then used to reduce the total value of the filer’s itemized deductions.  The total amount of reduction cannot exceed 80 percent of the filer’s itemized deductions.

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 percent for those in the top rate of $400,000 (individual) and $450,000 (joint) return.  After that, any gains above those amounts will be taxed at 20 percent.

The $250,000/$500,000 exclusion for sale of principal residence remains in place.

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.

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Rainer
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Randy Bocook
Keller Williams Coastal Area Partners - Richmond Hill, GA
Selling Coastal Georgia

Great news, Great information for millions of families out there. Randy

Jan 10, 2013 01:18 AM #1
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Rainmaker
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Rain Silverhawk

208-610-0011 Sandpoint Idaho Real Estate Realtor
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