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Real Estate Provisions in “Fiscal Cliff” Bill

According To The Latest NAR Issue Brief - Great Info!

On Jan. 1 both the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff.” The bill will be signed shortly by President Barack Obama.  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 January 1, 2014

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

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

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.

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Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.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%. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80% 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% for those 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 250/500k exclusion for sale of principle 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.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Leslie Dann Weinberg January 15, 2013 at 11:04 AM
Incorrect on the capital gains rate. As per the ACA, people making over $200,000 (individual) and $250,000 (couple) will be paying an additional 3.8% Medicare tax on dividends and capital gains, and I believe those will stand, regardless of the $400,000 level for earned income. Since the same lower spread also will pay an additional .9% Medicare tax, even if the rate stays at 15% for capital gains for those below $400,000, it will now be close to 20% even at $200,000. For those at $400,000 and above, it will be 20% plus the additional 4.7%, making it about 25% total.
Linda L Manning-Koziatek, REALTOR, LSA, CSA January 15, 2013 at 06:15 PM
Info is not INcorrect in the NAR article....... AS for the ACA - (Affordable Care Act) Tax Provisions In New PATIENT Protection and Affordable Care Act - you are correct -Thanks for your input!

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