How Does the Fiscal Cliff Impact South Florida’s Real Estate Market
How Does the Fiscal Cliff Impact South Florida’s Real Estate Market?
The term “Fiscal Cliff” has been on the tongues of Americans for months. January 1st has come and gone, but it wasn’t until Congress announced details of the Fiscal Cliff deal that the real estate industry at large was relieved. The Fiscal Cliff deal extends tax breaks and includes deductions that are beneficial to home owners across the country. So, how does the deal impact South Florida’s real estate market specifically?
For one, the Mortgage Debt Relief Act was extended through the rest of 2013, giving home owners who are underwater on their South Florida home the opportunity to avoid paying taxes on forgiven debt of their cancelled mortgages after undergoing loan modifications or short sales. To home owners, this was a huge financial relief because the alternative might have meant foreclosure or bankruptcy had the Mortgage Debt Relief Act not been extended.
Other real estate-centric details of the deal including a deduction of Mortgage Insurance premiums for home owners who have private mortgage insurance, FHA, VA low down payment loans, or those with a gross income of $110,000 or less. When doing their taxes, home owners who fall into these categories can write off these deductions on their federal tax returns in addition to their mortgage interest. The deal also included a 10% tax credit (up to $500) for energy-efficient home improvements. This tax credit is also extended to builders and contractors who meet specific environmental codes while building new homes. All in all, the real estate industry faired exceptionally well with the details of the Fiscal Cliff negotiations.
Here in the South Florida real estate market, two things will need to be resolved though when it comes to the real estate industry and the Fiscal Cliff deal:
1 The Mortgage Insurance Deduction From Income Taxes Remains: Under the new deal, the deduction of mortgage insurance from federal income taxes has been extended until December 31, 2013. For South Florida home buyers who have less than a 20% down payment, they will have to purchase the required mortgage insurance in order to deduct the insurance expense from their taxes. The mortgage insurance requirement is of interest in South Florida because the area is diligently trying to recover from the downturn over the past few years.
2 The FIT Exemption of Deficiencies in Short Sales and Foreclosures Continues: The new fiscal cliff legislation extends the exemption of deficiency amounts from short sales and foreclosures, but it only applies to properties that are homesteads. While it’s good news for those who only own one home, for South Florida home owners who are looking to offload a second home or investment property, the FIT implications continue as of 2013.
To learn more about South Florida real estate, please reach out to our expert team of real estate agents. We’d love to show you around!
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