On Jan. 1 both the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff.” The bill has been signed into law by the President. The measure permanently extends current income tax and capital gains rates for all taxpayers with taxable income up to $400,000 for individuals and $450,000 for couples.
The bill also extended several real estate related tax provisions, most notably, a one year extension to the end of 2013 of the Mortgage Debt Forgiveness Act that exempts loan amounts forgiven by lenders in short sales and foreclosures from being included in taxable income.
Other real estate provisions included:
- 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.
- 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.
- Finally, so called “Pease Limitations” that reduce the value of itemized deductions were permanently repealed for most taxpayers but will be reinstituted for individuals earning above $250,000 adjusted gross income and couples above $300,000.