- posted in Big Bear Real Estate
by Maureen Auer, Buyers Agent for The Bob Angilella Team
On January 1, 2013, both the Senate and House passed H.R.8, legislation to avert the “fiscal cliff”, and the bill was signed by President Barack Obama. Below is a summary of real estate related provisions in the bill. So, what does this mean for Big Bear Real Estate? Big Bear Real Estate is good for sellers and buyers.
Sellers: Although Properties in Big Bear are experiencing a bit of an “uptick”, many sellers are still having to list and Sell their Homes in Big Bear for less than what is owed. The Mortgage Debt Relief Act allows for sellers to avoid paying taxes on the debt forgiven “income”. Also, the inventory is at the lowest it has been for many years, which means less Homes for sale in Big Bear and more demand from buyers on each listing and more chances that the seller’s homes will sell.
Buyers: The current mortgage interest rates are still among the lowest they have been for many years, even for second home purchases, providing an excellent opportunity for buyers to purchase Big Bear Cabins. Also, due to the uncertainty at this point of whether or not the Mortgage Debt Relief Act will be extended again in the future, sellers will be encouraged to list and sell their properties this year, providing a healthy supply of Homes for sale in Big Bear.
Real Estate Tax Extenders
Mortgage Debt Relief Act of 2007, was scheduled to expire December 31, 2012, has been extended for another year, to January 1, 2014, a provision to exclude borrowers from paying taxes on debt forgiven through a short sale, foreclosure, or loan modification. If the act did not receive an extension, borrowers who received relief in the form of forgiven debt would be liable to pay taxes on the debt.
- Deduction for Mortgage Insurance Premiums, for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012.
- Leasehold Improvements, 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
- Energy Efficiency Tax Credit, The 10% 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% 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Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.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%. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80% 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% for those at 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/$500k exclusion for the sale of a 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%, up from 35%. The exemption amounts are indexed for inflation.
Maureen Auer – Realtor