The good news is that critical real estate?programs have been extended for a limited period of time. If you?re planning on buying or selling real estate this year, keep these time periods in mind:
- Capital gains tax exclusions for sale of a principal residence remain in place. This benefit protects up to $500,000 of capital gain ($250,000 for individual filers). However, home sellers with incomes of $450,000 ($400,00 for individual filers) or above and where the gain on the sale of their home is above $500,000 will now pay taxes on the excess capital gains at a higher tax higher rate.
- Key provisions of the Mortgage Debt Relief Act are extended through January 1, 2014. This provides financial relief in the form of lower taxes for home owners or sellers who have a portion of their mortgage debt forgiven by their lender. For sellers, this forgiveness occurs through a form of a short sale or foreclosure. For home owners, this relief comes in the form of a loan modification.
Without this extension, any debt forgiven would become taxable. Home buyers will benefit from this extension since it will likely result in a greater number of short sales and foreclosures being available for sale, as underwater sellers are more incentivized.
- Deductions for mortgage insurance for filers earning below $110,000 are extended to through 2013. Mortgage insurance?usually paid for by home buyers?allows home buyers who have less money to put down to qualify for better loans. Home buyers with qualified residences will be able to continue to deduct the cost of this mortgage insurance. This benefit is also retroactive through 2012.
- The 10 percent tax credit for energy improvements to existing homes is extended through 2013. This credit, which is limited to $500, applies to existing homes and is also retroactive through 2012.
- Capital gains on real estate contributed by home owners for conservation are extended through 2014. Increased contribution limits and carry-forward periods for contributions of appreciated real property will be maintained.
- The first $5M in individual estates and $10M for family estates are now exempt from estate tax. Tax rates in excess of these figures have increased. This will benefit the heirs.
Other changesmay also impact real estate decision-making. As always, home owners, buyers, and sellers are advised to seek the advice of a qualified tax advisor before making major financial decisions, including the decision to buy or sell real estate.
Need more information? Call Cindi Hagley at 925-867-4663.
Source: http://thehagleygroup.com/the-hagley-report/what-does-news-federal-finance-package-mean-to-you/
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