Special Report: Real estate provisions
in 'fiscal cliff'
bill
WASHINGTON - Jan. 2, 2013 - Yesterday, the House and Senate passed
H.R. 8, legislation to avert the so-called "fiscal cliff." Following are real
estate-related provisions of the bill, which President Obama plans to sign into
law today:
•
Mortgage Forgiveness Debt Relief Act extended to January
1, 2014. In place since 2007, the act provided a tax break for homeowners
who struggled through financial hardship such as a foreclosure, and were granted
mortgage debt forgiveness. In the past several months, National Association of
Realtors (NAR) issued numerous calls to action urging its million-plus Realtor
members to ask lawmakers to extend the tax break for another year. More than a
quarter of all transactions involve distressed properties, the NAR said in its
plea. "Homeowners shouldn't be forced to pay a tax on money they've already lost
with cash they never received."
•
Deduction for mortgage insurance
premiums for filers making below $110,000 is extended through 2013 and made
retroactive to cover 2012.
•
The 15-year straight-line cost recovery
for qualified leasehold improvements on commercial properties is extended
through 2013 and made retroactive to cover 2012.
•
The 10 percent tax
credit (up to $500) for homeowners for energy efficiency improvements to
existing homes is extended through 2013 and made retroactive to cover
2012.
•
"Pease limitations" that reduce the value of itemized
deductions are permanently repealed for most taxpayers but will be
reinstituted for high-income filers. "Pease" limitations will only apply to
individuals earning more than $250,000 and joint filers earning more than
$300,000. The thresholds are indexed for inflation so will rise over time. Under
the formula, filers gradually lose the value of their total itemized deductions
up to a total of a 20% reduction.
First enacted in 1990 and named for
Ohio Congressman Don Pease, who proposed the idea, the limitations continued
throughout the Clinton years. The limitations were gradually phased out starting
in 2003 and eliminated in 2010. Reinstitution of these limits has far less
impact on the mortgage interest deduction than a hard dollar deduction cap,
percentage deduction cap or reduction of the amount of mortgage interest
deduction that can be claimed.
•
The capital gains rate remains at
15 percent for individuals earning less than $400,000 per year and couples
earning less than $450,000. Any gains above these amounts will be taxed at 20
percent. The $250,000/$500,000 exclusion for the sale of principle residence
remains.
