The beginning of the year happened to start out quite well for taxes as related to real estate with the passing of the American Taxpayer Relief Act of 2012 (H.R.8) signed by the House and Senate and ultimately by President Obama. The National Association of REALTORS® disseminated the following information out to its agents earlier in the month. This by no means is exhaustive of all of the changes/modifications however these are items to take into consideration as you complete your tax returns and of course please verify all with a tax preparer/CPA.
Mortgage Cancellation Relief - this is extended for one year to January 2014, and pertains to the Mortgage Debt Relief Act. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. (Includes loan modification and short sale).
Deduction for Mortgage Insurance Premiums - this is for those who make below $110,000 and is extended through 2013 and made retroactive to cover 2012 - be sure you take this deduction for 2012 if it applies to you.
Energy Efficiency Tax Credit - the 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012 (another item to claim this year).
Capital Gains - stays at 15% for those at the top rate of $400,000 individual and $450,000 joint return. 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. Sellers whose income is $450,000 or above and the gain on the sale of their house is above $500,000 pay taxes on the excess capital gains at the higher rate.
Estate Tax - the first $5,000,000 in individiual estates and $10,000,000 for family estates are now exempted from the estate tax. After that, the rate will be 40%, which is increased from 35%. The exemption amounts are indexed for
Leasehold Improvements - 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and is retroactive to cover 2012.
Permanent Repeal of Pease Limitations for 99% of Taxpayers - reinstates provisions that phase out personal exemptions and deductions for incomes over $250,000 for single taxpayers and $300,000 for joint filers.
Alternative Minimum Tax (AMT) - permanently adjusted for inflation, making it unnecessary for Congress to adjust it each year. The AMT was enacted in 1969 to help ensure a minimum tax bill for high-income households that would otherwise minimize their taxes by shielding much of their income in deductions and using other tax strategies.
To find out what your home is worth in the current market, email me or phone me at 858-344-2213. Home prices in San Diego show values are increasing. You should know what your home is worth.