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VOL. 37 | NO. 3 | Friday, January 18, 2013

How ‘fiscal cliff’ deal affects homeowners

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The National Association of Realtors (NAR) released its assessment of how the H.R. 8, legislation that averted the “fiscal cliff,” will affect homeowners. In a section that NAR refers to as “Real Estate Extenders” there are four categories:

  • Mortgage Cancellation Relief is extended for one year to January, 2014. This affects those who sell their homes for less than the loan balance. Prior to the mortgage cancellation relief, the shortfall was considered income by the IRS and subject to taxation.
  • Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012. Mortgage insurance is required on loans that are more than 80 percent of the property’s value.
  • Leasehold Improvements: 15-year, straight-line recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
  • Energy Efficiency Tax Credits: The 10 percent tax credit (up to a whopping $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

Additionally, there was the permanent repeal of the Pease limitation for 99% of Taxpayers.

These limits were first enacted in 1990 (named for Ohio Congressman Don Pease, who came up with the idea) and continued through the Clinton years.

They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2011-2012.

Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers staring at $174,459 of adjusted gross income rather that HR 8’s limitations of $250,000 for single filers and $300,000 for joint.

Capital Gains

The capital gains rate stays at 15 percent for those at the top rate of $400,000 and $450,000 for the joint return. After that, any gains above those amounts will be taxed at 20 percent. The $250/$500k exclusion for the sale of a principal residence stays in place.

Estate Tax

The first $5 million dollars in individual estate and $10 million for family estates are now exempted from the estate tax. After that, the rate will be 40 percent, up from 35 percent.

Sales of the Week

Today, we shall review the lowest-priced sale of last week, as well as the highest sales price of the week.

The structure located at 1311 Baptist World Center Drive wins the dubious award for the lowest priced sales of last week. While not up on my baptistry, I do not feel that this house is located on the world center of all things Baptist.

Ironically, the 888 square feet in the home seem to reflect a biblical number, and the two bedrooms and one bath within the property were in need of a miracle in order to restore the home’s health.

Located on .27 acres, the home sold for $15,000 last week after having been listed for $45,000 some 40 days and 40 nights prior. Actually, it was 136 days.

According to records of the tax collectors, the previous owners had paid $203,000 for the abode in 2010.

So, $203,000 in 2010 and $15,000 in 2013 is hard to fathom. Someone forgave quite a bit of debt.

On the more paradisal end of the spectrum is the house at 2205 Woodmont Boulevard located amid the churches on Woodmont and Hillsboro Road, and is nestled in the shadows of the highly revered Woodmont Baptist Church.

This property was listed by Keith Merrill of Worth Properties, and he sold it for $1,435,000 in 45 days after having listed the estate for $1,495,000.

On Woodmont Boulevard, there are many mansions, and this heavenly home contained 6031 square feet with four full baths and two half baths.

Merrill noted that the home was filled with natural light, which the buyer evidently saw and felt it was good.

And in the back, there was a swimming pool inviting swimmers and those such as John Lennon, who it is said to have thought himself to be the Messiah at one point and decided to walk across his pool.

By the way, in the words of the Vanderbilt football coaching messiah James Franklin, Lennon anchored down, i.e. sank like an anchor/anvil. Linda Chancey with Pilkerton Realtors delivered the buyer.

Richard Courtney is a partner with Christianson, Patterson, Courtney and Associates and can be reached at richard@richardcourtney.com.