January 4, 2013
I’m sure you have all been wondering how the “Fiscal Cliff” agreement will affect you and your loved ones. Well, Michael Tobin, attorney and Managing Partner at the Miami office of Rothman and Tobin Attorneys at Law has provided us with useful information concerning the “Fiscal Cliff” agreement and how it relates to real estate transactions.
Below is a list with the changes and key provisions affecting real estate, which were enacted in the past few days by Congress, and were signed by President Obama.
- The "American Taxpayer Relief Act of 2012" extends permanently the tax rates in effect in 2012 for all households earning less than four hundred and fifty thousand dollars and four hundred thousand dollars for individuals. Taxpayers making more than these income thresholds ("High-Income Earners") will see their marginal tax rates revert to the 2003 levels of 39.6 percent, up from 35 percent.
- The capital gains tax rate will remain at 15 percent for most households, but will rise to 20 percent for the High-Income Earners (not including the separate 3.8 percent "ObamaCare" capital gains surcharge for High-Income Earners).
- Also remaining unchanged is the long-standing exclusion from taxes of five hundred thousand dollars in gains on the sale of a principal residence for couples (two hundred and fifty thousand dollars for individuals). High-Income Earners would, however, pay taxes on the excess capital gains at the higher 20 percent rate.
- Mortgage cancellation relief for those receiving debt forgiveness in short-sales and foreclosures, or owners receiving modifications, will continue and be extended for one year to January 1, 2014. Without the extension, any debt forgiven would be taxable, which, for underwater households, represents a financial burden.
- Other deductions for mortgage insurance premiums, state and local property taxes, and mortgage interest will also be extended, subject to certain restrictions.
Keep in mind that if you or anyone you know is considering doing a short sale this is the year to do it, due to the changes that will take place in 2014. Niki Higgins has a CDPE, which means she is a Certified Distressed Property Expert. You can contact Niki Higgins at 954-828-1858.
To read recent commentary on the bill and related issues, please click on these links:
House passes Senate 'Cliff' Bill (National Association of Realtors)
Obama signs 'fiscal cliff' bill with autopen (USA Today)
Key Points in Bill Passed by Congress to Avert US 'Fiscal Cliff' (Reuters)
As with all tax matters, you should consult a tax professional and attorney in order to confirm the applicability of tax laws to your particular situation or transaction.
