How The Recent “Fiscal Cliff” Bill Affects Real Estate In Hawaii

Taken from a recent article by the National Association of Realtors, below are the real estate provisions as highlighted in the “Fiscal Cliff” Bill passed through congress on January 1st and signed into law by President Barack Obama the following day.

Real Estate Tax Extenders

The following is extended through 2013:

• Mortgage Cancellation Relief

The following are extended through 2013 and made retroactive to cover 2012:

• Deduction for Mortgage Insurance Premiums for filers making below $110,000
• 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties
• 10% tax credit (up to $500) for homeowners for energy improvements to existing homes

Permanent Repeal of Pease Limitations for 99% of Taxpayers

“Pease Limitations” — that reduce the value of itemized deductions — are permanently repealed for all taxpayers with the exception of those individual filers earning more than $250,000 and joint filers earning above $300,000.

For those affected, the amount of adjusted gross income above those thresholds is multiplied by 3% and used to reduce the total value of the filer’s itemized deductions, with the total amount of reduction not exceeding 80% of the filer’s itemized deductions.

Initiated in 1990, continued through the Clinton years, and gradually phased out as a result of the 2001 tax cuts, “Pease Limitations” were completely eliminated in 2010-2012.

Capital Gains

Capital Gains rate stays at 15% for those in the top rate of $400,000 (individual) and $450,000 (joint) return. After that, gains above those thresholds are taxed at 20%.

Estate Tax

The first $5 million in individual estates and $10 million for family estates are now exempted from the estate tax. Due to inflation, the rate has increased from 35%-40% for estates above those thresholds. Learn more about these provisions.

Hope everyone’s 2013 has started with some gusto!

Aloha,
Miriam