California Assn. of Realtors Letter

California Association of Realtors Logoby Scot Campbell, Huntington Beach Realtor

Today I received the below letter from the President of the California Association of Realtors.  The letter provides a good “update” on several real estate topics including:  extension of the Mortgage Forgiveness Debt Relief Act (for both Federal and State), Mortgage Interest Deduction (update), Mortgage Insuarance Premiums (tax deductible), Tax credits for home energy improvements, Captial Gains Rate, Personal Residents $250,000 per spouce exemption still in place.

Read below for all the details… of course the information is deemed reliable, but not guarateed.  So be sure to check with your tax advisor or attorney on any of these items which may affect you.

January 8, 2013

Dear Scot,

Last week, I informed you that Congress had reached an agreement in the “fiscal cliff” negotiations and promised to give you more details.  President Obama signed the American Taxpayers Relief Act into law last Wednesday.

First of all, I want to recognize and thank the tens of thousands of C.A.R. members who worked to successfully maintain the mortgage interest deduction by responding to the Call for Actions and open letter advertisements in the state’s major newspapers.

As you know, the bill includes a provision to extend the Mortgage Forgiveness Debt Relief Act, which will for one more year exemptthe taxation of mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification (including any principal reduction).  While debt relief has been extended at the federal level, the California exemption expired at the end of 2012, so forgiven mortgage debt is considered taxable state income for now.

We’re aware of your concerns this could have on short sales, and that’s why C.A.R. is sponsoring SB 30 (Calderon, D-Montebello).  SB 30 will conform state law to the federal law passed last week.  Upon passage of SB 30, the measure will be effective retroactive to Jan. 1, 2013.

Here are other housing-related provisions included in the federal law:

  • The “Pease Limitations” that reduced the value of itemized deductions, including the mortgage interest deduction, are permanently repealed for most taxpayers but will be reinstituted for high income filers.  This provision reduces a taxpayer’s itemized deductions by 3 percent of the amount of his or her adjusted gross income (AGI) that exceeds the threshold amount.  Under the new law, the Pease thresholds are $300,000 for married taxpayers filing jointly and $250,000 for single taxpayers (i.e., a married couple with an AGI of $400,000 would be $100,000 over the threshold; the couple’s deductions would be reduced by $3,000 which is 3% of $100,000).  No matter how high a taxpayer’s AGI, the Pease reduction cannot exceed 20 percent of the amount of itemized deductions otherwise allowable for the year.  
  • The restoration of a tax deduction for mortgage-insurance premiums, including premiums paid to the Federal Housing Administration and private mortgage insurers.  This provision expired at the end of 2011 but has now been retroactively extended for all of 2012 as well as 2013.
  • 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.
  • Capital gains rates will remain at 15 percent for those earning less than $400,000 (individual) and $450,000 (joint).   Gains above those income levels will be taxed at 20 percent.  Gains on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 taxpayers filing jointly.

Again, a special thank you to those whose actions helped organized real estate preserve the mortgage interest deduction.

Sincerely,

Don Faught
President
CALIFORNIA ASSOCIATION OF REALTORS®

 

For questions about buying and selling real estate in Orange County, contact Scot Campbell.

He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA. 

He has been a licensed broker for over 21 years and has brokered over 1000 homes and just about every type of transaction imaginable.

Read his profile and client reviews at www.ScotCampbell.com

He can be reached at 714-960-0700 at the office, 714-336-0394 on his mobile number or via email at Scot.Campbell@ColdwellBanker.com

 

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