No Fiscal Fall: Real Estate Tax Laws in 2013
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Now that the dust has settled over that fiscal cliff, it's time to look at the fallout. How has real estate been affected by H.R. 8 legislation signed into law by President Obama on January 2, and what will it mean for homeowners, buyers and sellers?
Great News for Short Sales
Short sales will continue to qualify for mortgage cancellation relief through 2013. This allows homeowners a tax break for the difference of the sale price and the amount still owed on the mortgage, an amount that is forgiven by the bank in the bargain.
Mixed News for Mortgage Insurance Premiums
If homeowners have mortgage insurance, the premiums are tax deductible for those making less than $110,000. This is not only extended throughout 2013, it was made retroactive for 2012.
Energy Credits Extended
Certain energy improvements made in 2012 or planned for 2013 will qualify for up to a $500 tax credit. These are for existing homes and must be for the homeowner's primary residence. Homeowners who have previously claimed $500 in energy tax credits are not eligible. Energy efficient improvements include qualifying windows, exterior doors, skylights, insulation, roofing, and heating and cooling systems.
Estate Tax Exemptions
Individual and family estates now qualify for exemptions as well: the first $5 million for individual and the first $10 million for family. (These amounts will be indexed for inflation.) Estates above those amounts will be taxed at 40%, a 5% increase.
Capital Gains Remains
For those making less than $400,000 ($450,000 married filing jointly), the tax rate for capital gains remains at 15%. However, the tax rate on capital gains for those making more than $400/450K will be 20%.
While not everyone will be happy with the final legislation, and no income tax bracket is better off, many homeowners are relieved over what could have been a huge tax burden.
