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How the Fiscal Cliff Has Impacted the Real Estate Industry



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At long last, a deal was reached with the Fiscal Cliff situation in Washington as far as the tax cut aspect of the fiscal cliff discussion. But as real estate agents, one of our concerns is how does it impact our 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 earning $110,000 or less annually 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) and is retroactive to cover 2012.

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%, up from 35% in the previous years.

Leasehold Improvements Have Been Accounted For 2013, Retroactive to 2012
Qualified leasehold improvements on commercial properties can continue to receive a 15-year straight-line cost recovery.

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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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