With the real estate market not fully recovered, we can breathe a sigh of relief that Congress and the President did not implement huge tax implications for homeowners to resolve the Fiscal Cliff. One of the biggest items up for discussion was the Mortgage Interest Deduction. There was talk of eliminating it all together, making it only available to those earning under $250,000 or some type of tiered reduction. While the Mortgage Insurance Deduction is untouched, it is a source of revenue for the government, so we can expect this topic to come up again in the future.

Extended tax breaks for real estate:

  • Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014 – debt relief for foreclosures and short sales
  • Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
  • 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012
  • 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012

Capital Gains

Capital Gains rate stays at 15 percent for $400,000 (individual) and $450,000 (joint) return.  Above these amounts, the capital gains tax rate will go up to 20%. The dollar amount which you can exclude for the sale of a principal residence remains in place at $250,000 for individuals and $500,000 for married persons.

Estate Tax

The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax.  After that the rate will be 40 percent, up from 35 percent.

About Linda Urbick Linda

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