Help From The Cliff

On November 21,I had written here that the Mortgage Forgiveness Debt Relief Act was due to expire on December 31 (2 days ago), and strongly recommended that anyone possibly affected by its potential demise should immediately call, write or email their Congressional reps in the House & Senate, and demand that it be extended. Well, one of the many benefits of the passage late last night of a deal to avert the 'Fiscal Cliff' was inclusion in the bill averting the cliff of the extension for at least another year, to December 31, 2013. In case you have forgotten the details, the law allows homeowners going through short sales, modifications and/or foreclosures to avoid income tax liability on any forgiven debt as a result of the transaction. A cautionary reminder is also important here: only debt incurred on your home between two specific dates is covered. For details as to exactly how, or if, you are covered under the law, contact your accountant or tax preparer immediately if you are involved in any of these situations. Another benefit of the Cliff avoider is that, while capital gains taxes will increase from 15% to 20%, capital gains tax rates on sale of a personal residence will remain at 15%. So, if you are selling your home to avoide foreclosure (or for any other reason), and have a gain in value from when you purcheased it, you will still only pay capital gains tax at a rate of 15% of the gain, just as before the Cliff avoider passed last night. Congratulations to everyone in these circumstances, and a big 'thank you' to Congress for finally getting off its collective ass and doing something to help the country and its citizens! As we enter the New Year, continued Good Luck.