Short Sale Sellers South Florida l The Mortgage Forgiveness Debt Relief Act of 2007 l Extended to January 1, 2014

The Mortgage Forgiveness Debt Relief Act of 2007 which was passed into law on December 20, 2007 by former president George W. Bush did not expire December 31, 2012.

The House of Representatives and The Senate of the United States passed this important law for distressed sellers for another year.  With The Mortgage Debt Relief Act homeowners may be able to exclude up to $2 million of debt forgiven on your principal residence. Robert Freeman speaking for the National Association of Realtors informs us of  how the financial cliff has led us to this lengthening of time.

There are many distressed homeowners in South Florida with underwater mortgages. This central change in the tax code will help millions of local short sale home sellers who owe more on their property than it’s worth. Many areas have seen plummeted prices in recent years and only time will heal this market.

An email from Florida Realtors source came today to say;

Daily Briefing: Wednesday, January 2, 2013
A service for members of Florida Realtors

 

Special Report: Real estate provisions
in 'fiscal cliff' bill


WASHINGTON - Jan. 2, 2013 - Yesterday, the House and Senate passed H.R. 8, legislation to avert the so-called "fiscal cliff." Following are real estate-related provisions of the bill, which President Obama plans to sign into law today:

Mortgage Forgiveness Debt Relief Act extended to January 1, 2014. In place since 2007, the act provided a tax break for homeowners who struggled through financial hardship such as a foreclosure, and were granted mortgage debt forgiveness. In the past several months, National Association of Realtors (NAR) issued numerous calls to action urging its million-plus Realtor members to ask lawmakers to extend the tax break for another year. More than a quarter of all transactions involve distressed properties, the NAR said in its plea. "Homeowners shouldn't be forced to pay a tax on money they've already lost with cash they never received."

Deduction for mortgage insurance premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012.

The 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 percent tax credit (up to $500) for homeowners for energy efficiency improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

"Pease limitations" that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high-income filers. "Pease" limitations will only apply to individuals earning more than $250,000 and joint filers earning more than $300,000. The thresholds are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction.

First enacted in 1990 and named for Ohio Congressman Don Pease, who proposed the idea, the limitations continued throughout the Clinton years. The limitations were gradually phased out starting in 2003 and eliminated in 2010. Reinstitution of these limits has far less impact on the mortgage interest deduction than a hard dollar deduction cap, percentage deduction cap or reduction of the amount of mortgage interest deduction that can be claimed.

The capital gains rate remains at 15 percent for individuals earning less than $400,000 per year and couples earning less than $450,000.  Any gains above these amounts will be taxed at 20 percent. The $250,000/$500,000 exclusion for the sale of principle residence remains.

If you or a friend is in this situation and need help, please email Susan J. Penn, PA, cdpe, sfr  at penn.s@ewm.com or cal 954-557-5993.