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At long last, a deal was reached with
the Fiscal Cliff situation in Washington. But as a real estate agent, one of my
concerns is how does it impact my clients and the real estate industry overall?
Particularly in terms of capital gains taxes and other taxation issues, the
Fiscal Cliff deal has created some changes for the better in the real estate
industry. Here are some major points to keep in mind that will indeed have an
impact on how you make your real estate decisions in 2013 and beyond.
Mortgage Forgiveness Debt Relief Act
Extended Through 2013
One of the most beneficial programs
set up to help boost the housing industry and help homeowners with underwater
mortgages has been the Mortgage Forgiveness Debt Relief Act. With the latest discussions, through the end of the current
year homeowners that face short sales are still able to write off forgiven debt
as opposed to being taxed on what is considered taxable income.
Tax Deductions for Mortgage Insurance
Premiums Still In Place
Borrowers that pay expensive mortgage
insurance premium can still deduct that annual amount when they file their
taxes. Had this conclusion not been reached while Congress was settling all
issues at hand, homeowners with less than 78% equity would be taxed on the PMI
payments made every month. This has been extended through 2013 and is
retroactive for 2012.
Energy Efficiency Tax Credits
Available to Homeowners
Energy efficient homes continue to
create tax benefits for homeowners choosing to install approved home
improvements in their existing homes. The tax benefit is a credit of 10% (up to
$500).
No Change in Previous Capital Gains
Tax Rates
As it was in the previous year,
capital gains rate will remain at 15% for individuals making $400,000 and
households earning $450,000. After that, the tax rate is 20%. There are no
changes to the tax exclusion for the sale of a single-family home for gains of
$250,000 for individual and $500,000 for couples.
Estate Tax Guidelines Allow For
Additional Leniency
The first $5M in individual estates
and the first $10M in family estates are now exempt from estate taxes. After
that, the tax rate is 40%.
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We hope this update will assist you
in making informed decisions in your real estate endeavors. As always, we
invite you to contact us for any of your real estate needs, whether buying,
selling or investing in a property.
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