Here is an informative update on the Debt Forgiveness and Tax Relief Extension issue, provided courtesy of Attorney Steve Beede of the BPE Law Group in Elk Grove, California, near Sacramento:
The negotiation is going fast and furious in Washington all focusing around the so-called fiscal cliff on December 31st. For well over a year, real estate owners have been focusing on two major issues: 1) will the Debt Forgiveness Tax Relief Act (“ACT”) get extended; and more recently, 2) with the Mortgage Interest Deduction (“MID”) disappear. At this point, there is no clarity.
All of the focus of Washington negotiators has been on whether the Bush era tax cuts should expire on 12/31. If so, it will mean an immediate tax increase for all. The Republicans are fighting this but recognize that more income is needed to balance the Budget. But tax increases alone cannot do it alone. Spending decreases are also required and the hot targets of these have been Medicare and Defense. Although very little is being said specifically about the ACT and the MID in the Obama – Boehner negotiations, both are very much in play.
When we spoke with the Office of Charles Rangle last week (Chair of House Banking and Finance Comm), he thought that an agreement might be reached before Christmas. That time is slipping away but a compromise is still a possibility. The House and Senate were supposed to go home on December 16th for their Holiday Recess and many have done just that. But they’re all ready to return and vote if a deal is reached. Although the negotiators appear far apart on the surface, in reality they are getting close…at least close enough to avoid some of the fiscal cliff’s immediate tax increases. So we all watch and wait.
Most analysts are now anticipating that a full deal including all the specifics will not be reached in 2012 but most likely would be reached by early to mid 2013. For the ACT, it is expected that it will get extended and that when it does, the extension will be retroactive to January 1st. For the MID, that may take much longer and would, if passed, be tied to income and other qualifiers. Nothing concerning either of these would affect your taxes for 2012. However, both of these will be of major importance to real estate owners and investors in 2013 and beyond.
Steve Beede, Founder and Managing Partner
BPE Law Group, Inc.
Main: 11140 Fair Oaks Blvd., Suite 300, Fair Oaks, CA 95628
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