No Fiscal Cliff For The Mortgage Forgiveness Act

cliffAs part of the legislation to prevent the fiscal cliff, the House and Senate recently passed the American Taxpayer Relief Act of 2012.

Items Covered under the American Taxpayer Relief Act of 2012

The Mortgage Forgiveness Debt Relief Act: This is now extended until January 1, 2014.  This bill was first passed in 2007 to provide a tax break for homeowners who were struggling with financial hardship.  In the case of a short sale or foreclosure, this act grants the homeowner forgiveness of the outstanding mortgage debt on their primary residence.  This means that when you short sale your property and the bank accepts less than you owe as payment of the mortgage, the remainder of the debt is not considered taxable income and reported to the IRS.  This is a very big relief to many homeowners who were still in the short sale transaction when January 1, 2013 arrived.  For a short time we didn’t know whether this law would be extended and the additional tax for distressed homeowners would have been substantial.

Deduction for Mortgage Insurance Premiums: This deduction for homeowners earning less than $110,000 per year has been extended through 2013 and made retroactive to  cover 2012.

Tax Credit for Energy Efficient Improvements:  There is a 10% tax credit (up to $500) for homeowners who make energy efficient improvements to existing homes.  This credit is extended through 2013 and made retroactive to 2012.

Capital Gains Tax:  The capital gains rate stays at 15% for individuals earning less than $400,000 and couples earning less than $450,000 per year.  Any gains above these yearly income amounts are taxed at 20%.  The $250,000 per person or $500,000 for couples exclusion for the sale of a principal residence remains.

Estate Tax:  The first $5 million in individual estates and $10 million for family estates are now exempt from estate tax.  After that amount the estate tax rate will be 40% increased from 35% previously.

If you are in a situation that you need to short sale your home, please contact me so that we can discuss your options.  I have worked on many short sales both with sellers and buyers and can give you the expertise you need.  There is no obligation but it is always a good idea to discuss your options with a professional before making a very important decision.

Remember, it is always Toasty in Naples and you deserve your piece of Naples Florida sunshine!

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