Thankfully, the so called “fiscal cliff”, an economically damaging set of tax hikes and spending reductions that were scheduled to begin in 2013, has been avoided (for now). This is good news for housing in the short-run.
The enactment of H.R. 8, the American Taxpayer Relief Act of 2012, will extend permanently most, but not all, of the 2001/2003 tax cuts. The legislation prevents a fiscal drag of approximately $600 billion in 2013, which may have been large enough to push our current weak economy into recession. That in turn would have reduced demand for both owner-occupied and renter housing.
The following items in H.R. 8 are of interest to home owners:
- Extends through the end of 2013 mortgage debt tax relief; important rule that prevents tax liability from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt
- eduction for mortgage insurance extended through the end of 2013; reduces the cost of buying a home when paying PMI or insurance for an FHA or VA- insured mortgage; $110,000 AGI phaseout remains
- Extends the section 25C energy-efficient tax credit for existing homes through the end of 2013; important remodeling market incentive, although the lifetime cap remains at $500.