We all heard about the "fiscal cliff" and the
midnight deal that temporarily dealt with the problem but how did this
agreement affect the real estate market? The below article talks about
that and more.
Courtesy of Chicago Agent Magazine
by PETER RICCI
We knew it would go down to the wire –
after countless discussions, negotiations andstories by the media, Congress
finally reached an agreement to avert the so-called “Fiscal Cliff,” and the
housing market, upon initial impressions, seems to have escaped the party
relatively unscathed.
Not only is the mortgage interest tax deduction still in
place, the Mortgage Forgiveness Debt Relief Act of 2007 was extended for
another year and even the deductibility of mortgage insurance premiums for
select homeowners was renewed through 2013. That all sounds great, but does the
nature of Congress’ bargain bode unwell for housing?
The Housing Market and the Fiscal Cliff: Dancing Cheek to Cheek
As HousingWire noted earlier today,
the immediate outcomes of the American Taxpayer Relief Act of 2012, as the
fiscal cliff bargain was called, were a net positive for the housing market:
·
The mortgage insurance premium
deduction, which has expired at the end of 2011, allows eligible borrowers who
itemize their tax returns (and who have incomes of less than $100,000 per year)
to deduct 100 percent of their annual mortgage insurance premiums.
·
The Mortgage Forgiveness Debt
Relief Act of 2007, which was set to expire on Dec. 31 of 2012, was extended
for 2013, so for another year, homeowners engaging in short sales will have
their debt reductions excluded from taxable income (though as we’ve covered
before, that only applies to
a specific kind of underwater homeowner).
·
Even the increase of the capital
gains tax rate from 15 to 20 percent for individuals earning more than $400,000
will have minimal impact on housing; as HousingWire explained, only if
individuals have the aforementioned income level and gain more
than $250,000 from the sale of a property will they be affected by the higher
rate.
·
And as RisMedia noted, no
trade group was more active than the National Association of Realtors for
housing legislation in 2012, so it’s likely that NAR’s political clout
reflected positively on housing in the negotiations.
Housing Market – Sequester This!
Of course, as with many things in Washington, it’s not a
simple matter of President Obama signing the American Taxpayer Relief
Act of 2012 and all our problems going away. As NPR wrote in
an excellent summary of the act and its importance in the fiscal cliff discussions,
the U.S. government still faces the same budget deficits that it did in 2012;
rather than addressing those deficits, the act instead targets the taxation
side of the fiscal cliff discussions, and delays any discussions of the deficit
(and the automatic spending cuts, sometimes called “sequestration,”
that would take place) to March.
And that fact, said Spencer Cowan of the Woodstock Institute
here in Chicago, should keep real estate agents on their toes.
“Clearly, this is a very temporary situation,” Cowan said.
“I wouldn’t feel safe about anything.”
Between the government’s budget deficit, the debt ceiling
and the fragmentary nature of our current Congress, Cowan said all are problems
that still need to be addressed, and though housing dodged a bullet in the
preliminary discussions, it could still become a bargaining chip come March,
when the sequestration talks resume – and the coveted mortgage interest tax
deduction could definitely be a part of those discussions.
Posted by Bradford Miller Law, PC
A downtown Chicago law firm practicing in the areas of real estate and estate planning. We offer free representation for homeowners contemplating a short sale. For a free consultation, contact our office at 312-238-9298.
