Late last night the U.S. House of Representatives voted 257-167 to pass the U.S. Senate’s plan to avert the ‘fiscal cliff.’ President Obama has said he will sign the bill into law. Congress agreed that current tax rates will stay the same for households that make less than $450,000 annually, and $400,000 annually for individual filers. This coupled with the fact that there will be no change to capital gains taxes, the National Association of REALTORS® (NAR) believes there will be no change financially for the vast majority of home buyers and sellers.
Here are few key issues that affect REALTORS®, home buyers and sellers.
- Congress excluded a capital gains tax increase for sale of a principle residence of up to $500,000 ($250,000 for individuals). The tax rate on capital gains would also remain the same, at 15 percent, for most households, but for those earning above the $400,000-$450,000 threshold, the rate would rise to 20 percent.
- The Mortgage Forgiveness Debt Relief Act of 2007 was extended. This provides relief to troubled borrowers when some portion of mortgage debt is forgiven. This averts the crisis many short sales were facing with the New Year. The mortgage cancellation relief extension is for one year.
- Congress extended deductions for mortgage insurance premiums, state property taxes, and local property taxes. The limitation is that he write-off is available only to borrowers who have an adjusted gross income below $110,000.
- The mortgage interest deduction was left untouched, continuing tax relief for homeowners.
- Tax credits for energy-efficiency home improvements. This provides tax credits of $200 to $500 for owners who install energy-efficient windows, insulation and other upgrades designed to cut energy consumption in 2012 and 2013.
- Tax credits for new energy-efficient new houses. This allows builders and contractors to claim a $2,000 tax credit on new homes constructed in 2012 and 2013 that meet federally specified energy-conservation standards. The bill also extends credits for U.S.-based manufacturers of energy-efficient refrigerators, clothes washers and dishwashers. As with other energy-related tax provisions, this had expired last year and will now be continued through 2013.
Not all aspects of the fiscal cliff have been dealt with, and come February Congress will be required to re-engage the issue to deal with the national debt ceiling and required federal budget cuts.
All in all, it’s not too bad.