The mortgage interest deduction was not touched by the deal, and Congress extended mortgage debt forgiveness tax relief for another year. The extension will be positive for the industry because it will reduce the number of foreclosures. The less foreclosures made, the less houses on the market, driving home values upward.
Also, the enactment of the American Taxpayer Relief Act of 2012 will extend most of the 2001/2003 tax cuts permanently. Doing so prevents a large fiscal drag which could have pulled the economy into a recession. It also aids the continuing home building recovery, maintaining demand for owner-occupied and renter housing.
As homeowners and builders, the following items may apply (as reported by the NAHB):
The business side
- Permanently extends the 2001/2003 tax rates for adjusted gross income levels under $450,000 ($400,000, single)
- Permanently sets the parameters of the estate tax
- Extends present law section 179 small business expensing through the end of 2013
- Extends the section 45L new energy-efficient home tax credit through the end of 2013
This allows a $2,000 tax credit for the construction of for-sale and for-lease, energy-efficient homes where less than three floors are above grade.
The homeowner side
- Extends mortgage debt tax relief through the end of 2013
This will prevent tax liability from some short sales or forgiven, deferred or cancelled mortgage debt.
- Deduction for mortgage insurance extended through the end of 2013
- Extends the section 25C energy-efficient tax credit for existing homes through the end of 2013
Also notable is that there is no mention of an itemized deduction cap or a defined fast-track tax reform process. This lends itself to further discussion by the government in its continuation of solving the long-term debt challenges.
We are hoping that home prices in 2013 will stabilize in all markets with appreciation in many parts of the country. New home construction is a positive trend in some markets and we anticipate seeing more new homes being built and sold. Real estate is detrimental to a healthy economy for America.
How have these decisions affected you already? What do you foresee happening when the government revisits this financial issue in the near future? Let’s discuss in the comments.