HR-8, The Senate bill that passed the House to avoid the ‘Fiscal Cliff ‘extended a number of federal tax code provisions that are important to home buyers, sellers, builders and real estate professionals. Here's a quick overview of what the legislation means for housing:
- Mortgage Forgiveness Debt Relief extended through 2013- Had Congress not acted, the tax code would have reverted to its 2007 policy for mortgage principal reductions or cancellations by lenders, ie: loan modifications, short sales, or deeds-in-lieu or foreclosures. All principal balances written off would be treated as income for the homeowners. If a lender wrote off $100,000, the seller would be taxed on that $100,000 just as if they had earned it. This would have encouraged more people to go the foreclosure and bankruptcy route.
- Deduction of mortgage insurance premiums- This deduction lapsed at the end of 2011 and has been retroactively extended for all of 2012 through 2013. Qualified borrowers who pay PMI or guarantee fees on FHA, VA and Rural Housing mortgages will be able to write off those premiums along with their interest. You need to have an adjusted gross income below $110,000 in order to take advantage of this deduction.
- Credits for energy efficient home improvements- Provides tax credits of $200 to $500 for installing energy-efficient windows, insulation and other upgrades designed to cut energy consumption. The bill covers 2012 and 2013.
- Credits for new energy-efficient new houses- Builders and contractors can claim a $2,000 tax credit on new homes constructed in 2012 and 2013 that meet certain conservation standards. The bill also extends credits for U.S.-based manufacturers of energy-efficient refrigerators, clothes washers and dishwashers through 2013.
