1/1/13 “Fiscal Cliff” Bill as it relates to Real Estate

  • The Mortgage Cancellation Relief Act was extended to January 1, 2014. In essence, debt forgiveness of loan(s) secured by your home used to buy, build or substantially improve your primary residence via short sale, modification, or foreclosure will more than likely not be subject to taxation. 

There are exclusions: There is a debt relief cap ($2million/$1million married and filing jointly), dates for qualified debt exclusions, specific rules if debt(s) qualifies for income tax exclusion, etc. Investment property debt is not included in this act and may be taxable.

Always consult an accountant and attorney before signing a final agreement on any debt relief settlement.

  • Mortgage Insurance Premium Deduction for filers making below $110,000 is extended through 2013
  • Energy Efficiency Tax Credit of 10% (up to $500) was extended through 2013 for homeowners who make energy improvements to their existing home.
  • Capital Gains Tax remains at 15% for individual tax returns of up to $400,000 in income/joint returns of up to $450,000. Above those amounts, capital gains tax increases to 20%. The $250,000/$500,000 capital gains exclusion for the sale of a principal residence every two years remains in place.
  • Estate taxes went from 35% to 40% for estates over $5 million individual/$10 million family estates. Estates below these thresholds are exempt from estate taxes.

Additional information