What the American Taxpayer Relief Act of 2012 Means to Real Estate in 2013

As we collectively tiptoe backward from the so-called fiscal cliff, those of us in the real estate industry are sifting through the American Taxpayer Relief Act of 2012 to see what it means for our clients.
First and foremost, the act extends the Mortgage Cancellation Relief through Jan. 1, 2014. What this means is that homeowners facing short sales, reduced loan principals, or foreclosures in 2013 can avoid paying taxes on any debt still owed to the bank. Had this provision not passed, the IRS would have taxed the debt as income. The fear that this measure would expire sent homeowners rushing to complete short sales by the end of 2012.
Also high on the priorty list is the deduction for mortgage insurance premiums for filers making below $110,000. Mortgage insurance is insurance that some lenders require home buyers to pay if they put little or no money down. The purpose of this insurance is to insulate the lender against default by the borrower. Mortgage insurance is often called PMI, for private mortgage insurance.
The American Taxpayer Relief Act allows qualified homeowners to write off this insurance premium, in addition to other deductions related to home ownership  such as mortgage interest and property taxes. Some insurance trade groups estimate this provision saves a typical homeowner about $350 in taxes.
Other import provisions of the act include a 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties. is extended through 2013 and made retroactive to cover 2012.
Also homeowners can take a 10 percent tax credit up to $500 for homeowners for energy improvements to existing homes.
If you want to know what this can mean to your taxes, consult your tax professional. If you want to know what this means for your home buying and selling opportunities in 2013, give me a shout!