The American Taxpayer Relief Act of 2012 (H.R. 8) is now passed by Congress and is expected to be signed this week by President Obama. You may read the 157 page bill from the U.S. Government Printing Office or you can review our summary of the bill by clicking here.
According to the Congressional Budget Office, H.R. 8 is expected to raise $620 Billion in revenues but will also contribute an additional $4 Trillion to the deficit over the next 10 years. The next round of negotiations will be over the debt ceiling and the delayed sequester for spending cuts. The national debt has reached the $16.4 Trillion ceiling and the Treasury has already implemented a "debt issuance suspension period" which is an unusual set of measures to pay our debts through February 28th 2013. The automatic sequester of across the board spending cuts was delayed by H.R. 8 until March 1st 2013. Expect some fireworks in January and February!
So what does this mean to the housing market? Here are some observations:
- There are no changes to the mortgage interest deduction. Taxpayers may still deduct mortgage interest as before.
- However, the AMT (Alternative Minimum Tax) already placed limits on these deductions. The new provisions to fix the AMT exemption and index for inflation will prevent millions of homeowners from these indirect limits for their mortgage interest deduction. Higher incomes (typically over $150,000) will continue to see limits to their deductions. Plus there is a new set of deduction and exemption "phase-outs" for incomes of $250,000 for singles or $300,000 for married couples filing jointly. It is unclear how the new provisions will impact mortgage interest deductions since they are already affected by the AMT.
- The COD (cancellation of debt) provision for short sales for primary residences was extended through 2013. This is a big deal since many distressed homeowners may have avoided a short sale or principal reduction if they were going to receive a 1099 from the IRS. This would have increased the rate of foreclosure.
- The estate & gift tax exemption is now fixed at $5 million with a 40 percent tax above that amount.
- Home energy tax credits are extended through 2013.
- The deduction for PMI mortgage premiums is extended through 2013.
In summary, there are positive impacts for housing. The mortgage interest deduction is actually improved for millions of homeowners who would have been limited by the AMT. The COD exclusions will promote short sales and continue to heal up our distressed areas. The wealth transfer from baby boomers who are passing on their estates will help fuel more home purchases.
Yes, there are some major battles ahead on spending reform and additional sources of revenues. We may see some short-term hiccups in our economy as we work through these issues. But we are on the right path for slow but steady improvement in our economy.
The latest facts point to a very bullish real estate market here in the Greater Metro Atlanta area. Click here for the TOP 10 Drivers of Housing Demand in 2013. It is a great time to buy the home of your dreams and set an incredibly low mortgage rate. These opportunities will not last forever as home prices and mortgage rates rise in the future.
Please Contact Me For Additional Insight About The Opportunities For Real Estate In 2013.
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