Real Estate Provisions in the “Fiscal Cliff” Bill
On Jan. 1 both the Senate and House passed H.R. 8 legislation to avert the “fiscal cliff.” The bill was signed into law by President Barack Obama on Jan. 2.
Below is a summary of real estate related provisions in the bill:
Real Estate Tax Extenders
- Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014
- Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
- A 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012
- A 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
Permanent Repeal of Pease Limitations for 99 Percent of Taxpayers
Under the agreement, so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. These thresholds have been increased and are indexed for inflation and will rise over time. Under the formula, the amount of adjusted gross income above the threshold is multiplied by 3 percent. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80 percent of the filer’s itemized deductions.
These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012. Had we gone over the fiscal cliff, Pease Limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.
Capital Gains rate stays at 15 percent for those in the top rate of $400,000 (individual) and $450,000 (joint) return. After that, any gains above those amounts will be taxed at 20 percent. The $250,000/$500,000 exclusion for sale of principal residence remains in place.
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. The exemption amounts are indexed for inflation.
Source: National Association of Realtors®, realtor.org
If you would like to suggest a topic for inclusion in one of our future email newsletters, contact us today! We look forward to hearing from you.
Rory S. Coakley
Coakley Realty, Inc.
20 Courthouse Square, Suite 107
Rockville, MD 20850
FIND THE PROPERTY YOU NEED.PROPERTY SEARCH
CONTACT US TODAY
Featured Real Estate Listings
Under ContractFlex (Condo)100 Executive Drive,
PRICE REDUCED!!! Reliable investment property, fully leased. Excellent location right off 606, adjacent to Dulles Airport. This flex/office condo is Unit #2, and is divided into two units, each just under 5,000 SF. The First floor is built out as office/warehouse, and the Second floor is office.VIEW LISTING
Residential 20700 Ashburn Station Pl,
Ashburn, VA 20147
Beautifully renovated and meticulously maintained, this fabulous brick colonial is located in one of historic Ashburn's most desirable neighborhoods and sought-after school pyramids - Cedar Lane/Trailside/Stone Bridge! Gracefully sited on a premium corner lot (nearly half an acre), this property showcases all the distinctive details you are looking for.VIEW LISTING