Real estate professionals are always looking for tax breaks that could potentially save their clients some money. At the end of 2013 dozens of tax laws are set to expire and many of those provisions are quite popular.
These provisions will likely be extended by Congress, but it is still unclear when or how lawmakers will take action. The situation is tangled by the fact that both the White House and Congress want to pass serious tax reform in 2014. Crucial members of the Obama Administration and Congress have suggested that some of these expiring provisions be made part of the overall tax reform.
Some of the expiring provisions that are most important to the real estate industry include:
Mortgage insurance premiums deduction: Since 2007, homeowners that qualify have been able to deduct premiums for mortgage insurance provided by the Department of Veterans Affairs, Federal Housing Administration and private mortgage insurance. Homeowners with qualifying incomes treat such payments the same as mortgage interest payments. Unless extended, no deductions will be allowed for amounts paid or accrued after Dec. 31, 2013.
Tax credit for qualified energy efficiency improvements to principal residence: Homeowners have been able to claim a maximum lifetime tax credit up to $500 for energy efficiency improvements to their main homes. This includes the cost of insulation, windows, doors and roofs. This credit expires at the end of 2013.
Section 179 expensing deduction: The IRC Section 179 allows small-business owners to deduct the cost of business property in a single year instead of discounting the cost over several years. Section 179 is susceptible to an annual dollar limit. From 2010 through 2013, the annual limit was $500,000. The limit is scheduled to go down to $25,000 in 2014.
Energy-efficient commercial buildings deduction: Since 2006, a special deduction has been available for commercial building owners who upgrade their existing buildings to make them more energy efficient or build more new energy-efficient structures. A deduction up to $1.80 per square foot was available for energy upgrades to interior lighting systems, heating, cooling, ventilation and hot water systems. This deduction ends in 2013 unless extended.
A list of all the expiring tax laws is available in a report from the Joint Committee on Taxation.
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