Firstly, the Mortgage Forgiveness Debt Relief Act of 2007 was extended through 2013, providing mortgage cancellation relief for Chicago home owners and sellers and reducing capital gains taxes on the portion of forgiven mortgage debt. As RealtyTrac reported in this year-end U.S. Foreclosure & Short Sales Report,™ the last quarter of 2012, showed short sales made up 19 percent of residential home sales in the United States, a rather significant number. Homeowners seeking short sales options now have until December 31, 2013 to benefit from these reduced taxes.
Secondly, as a homeowner, the American Taxpayer Relief Act of 2012 excluded gains on sales of principal residences of up to $500,000 and $250,000 for individuals. So, while home sellers with incomes above $450,000 and home gains over $500,000 will pay slightly higher taxes on excess capital gains, most home owners will not see a change in capital gains taxes.
Thirdly, if you had energy improvements made on your Chicago home in 2011 or 2012, you can smile as well. Residential energy tax credits can be credited retroactively, meaning that some energy-wise improvements are still applicable. This extension also provides an extra year to make your improvements, stating that the work only needs to be started by December, 31, 2013 to qualify. Only some energy-efficient appliances and upgrades are approved, including biomass stoves, HVAC systems, insulation or roofing, non-solar water heaters, or windows, doors, and skylights installed in your Chicago home in 2011, 2012, or 2013, so be sure to review the tax credit requirements in theTaxpayer Relief Act before starting your project.
According to Internal Revenue Service form 5695, many energy efficient items can qualify for a 10% credit with a lifetime limit of $500. Window replacement can only account for $200 of that credit, however. A tax credit of up to 30% is also available on geothermal heat pumps, solar energy systems, wind energy systems, or fuel cells, until 2016, as well.
Other home related news in the American Taxpayer Relief Act of 2012 is that home building contractors will continue to receive credits for providing new homes that are energy-efficient, allowing for greater energy conservation by homeowners. Please refer to a qualified tax consultant for details on how these extensions affect you and your Chicago home.