It was no big surprise that the debt-tax exemption was extended until January 1, 2014 yesterday. It was part of the latest Congressional boondoggle – here is an excerpt from HW:
One of the more watched provisions of the fiscal cliff was the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on Dec. 31.
The fiscal cliff deal extends it for another year, meaning homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.
“The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence,” Compass Point Research & Trading said. “For homeowner’s to qualify, their debt must have been used to ‘buy, build, or substantially improve’ their principal residence and be secured by that residence. The law, which was passed in 2007 with a 5-year sunset provision, will now be in effect until Jan. 1, 2014.”
One of the best benefits hidden in the mess was the increase in the estate-tax exemption, which was set to revert to a 55% tax on everything over $1,000,000. Here is the new version, from the WaPo:
Although the tax rate will rise from 35 percent to 40 percent, estates worth as much as $5 million — $10 million for married couples — will go untaxed. And an inflation adjustment will guarantee that the size of the exemption will grow to $15 million for couples by the end of the decade.
At least it’s behind us for now?