What the fiscal cliff deal means to homeowners


By Mary Watts
Special to The Citizen

On January 1, the Senate and House passed H.R. 8 legislation to avert the “Fiscal Cliff.” The bill was signed into law by President Obama on January 2. So what does that mean to you as a homeowner? There are several specifics of the agreement that directly affect homeowners. Make sure that you are aware of the following when developing your 2013 Financial Plan.

Mortgage Debt Relief Act extended. The bill extended the Mortgage Debt Relief Act of 2007 which was due to expire 12/31/2012, and is now extended to 1/1/2014. This Act excludes borrowers from paying taxes on debt forgiven through a short sale, foreclosure or loan modification.

Mortgage Insurance Deduction. The tax Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and retroactive to cover 2012.

Energy Credit Extended. A 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and retroactive to cover 2012.

Capital Gains. The Capital Gains rate stays at 15% for those in the top rate of $400,000 (individual) and $450,000 (joint) return. Any gains above those amounts will be taxed at 20%. The $250,000/$500,000 exclusion for sale of principal residence remains in place.

Estate Tax. The first $5 million 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%. Exemption amounts are indexed for inflation.

Pease Limitations. Under the agreement “Pease Limitations” that reduce the value of itemized deductions, are permanently repealed for most taxpayers, but will be reinstituted for high income filers.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 making more than $250,000 and joint filers earning above $300,000.

I hope that this short summary helps you with your financial planning this year.

If you read my column last month, you know that the Fayette Realtors are going to be volunteering and giving back to our community. I am excited and pleased to let you know that our first volunteerism this year will be with Special Olympics which will take place at the end of March.

Mary Watts is the 2013 President of the Fayette County Board of Realtors, (FCBR) a professional trade association established in 1969 of over 400 licensed real estate brokers and salespersons engaged in all aspects of the real estate business throughout the county and surrounding areas. FCBR is the local advocate for the real estate industry in Fayette County, committed to protecting private property rights and free enterprise, maintaining ethical and professional standards and enhancing the public’s awareness and confidence in REALTORS.