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The fiscal cliff. You may have heard of it and you may know what it is. But how does the fiscal cliff affect homeowners and the real estate industry? I have narrowed down the top 4 things homeowners need to know about the fiscal cliff in 2013:
1. It’s all about the dates.
There are some important dates that will affect you as a homeowner. But what day is important and what day isn’t? Here’s what you really need to remember:
- The bill was signed into law by President Obama on January 2, 2013.
- Mortgage Cancellation Relief is extended for one year to January 1, 2014.
- 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.
2. Pease Limitations
Pease Limitations reduce the value of itemized deductions and are permanently repealed for most taxpayers. These will, however, be reinstituted for high income filers (individuals earning more than $250,000 and joint filers earning above $300,000). The amount of adjusted gross income above the threshold is multiplied by 3 percent, however, the total amount of reduction cannot exceed 80% of the filer’s itemized deductions.
3. Capital Gains
Capital Gains rate stays at 15% 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%. The $250,000/$500,000 exclusion for sale of principal residence remains in place.
4. 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. The exemption amounts are indexed for inflation.
To learn more about the fiscal cliff, be sure to visit the following resources:
