Mortgage Forgiveness Debt Relief Act

Thursday, January 10th, 2013

Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would count as income for tax purposes. Lenders send out 1099s to account for the amount of the debt they have forgiven.

However, the Mortgage Forgiveness Debt Relief Act (Act) that was passed in 2007 states that mortgage debt that is forgiven (for instance in a short sale) can be excluded from income, with certain limits, so long as the taxpayer qualifies under the Act. In 2008, Congress extended the Act through 2012. Because of the “fiscal cliff”, many were worried whether the Act would be extended again; however, as part of the American Taxpayer Relief Act of 2012, the Mortgage Forgiveness Debt Act was extended to December 31, 2013.

It’s important to note that the American Taxpayer Relief Act extends dozens of other tax cuts that were scheduled to expire. Check with your tax professional to see if you may qualify under the Mortgage Forgiveness Debt Relief Act and how you may be able to take advantage of other tax cuts included in the American Taxpayer Relief Act.

Tax Credit on Wind Energy Extended

Saturday, January 5th, 2013

Colorado ranks 12th in the nation in wind energy production, according to the American Wind Energy Association(AWEA), and wind turbines will keep on turning in 2013. Congress voted to extend the tax credit on wind energy that many said was key to the survival of Colorado’s wind-power industry. The credit’s one-year extension was included in the measure to avert the fiscal cliff.

“On behalf of all the people working in wind energy manufacturing facilities, their families, and all the communities that benefit, we thank President Obama and all the members of the House and Senate who had the foresight to extend this successful policy, so wind projects can continue to be developed in 2013 and 2014,” Denise Bode, CEO of AWEA, said in a statement after Congress’ vote.

This 2013 extension looks a little different than years past. To be eligible for the tax credits, projects must simply have started construction by the year’s end. They don’t have to be complete to qualify.

New Medicare Tax Coming in 2013

Monday, November 19th, 2012

The housing market may be recovering, as many experts suggest, but investors are still struggling to understand what taxes they will owe upon selling their homes.

The Patient Protection and Affordable Care Act will affect those who hold rental income properties and vacation homes starting in Jan 2013. “Unearned income” will be subject to a new 3.8 % tax. What is unearned income? Bond interest, dividends from stocks, royalties, capital gains from selling investments at a profit, and income from rental property are all examples of unearned income.

Therefore, rental owners who have built substantial equity may see strong incentives to sell in 2012 before the new changes take effect. There are a few exceptions to this strategy:
If you give long term capital property to charity, you will avoid the capital gains tax; and,
If you hold appreciated stock until death, you may avoid the capital gains tax entirely.

Federal Tax Deadline Extended To April 17, 2012

Friday, March 23rd, 2012

Tax Day moved to April 17, 2012Traditionally, federal income taxes must be filed with the IRS on, or before, April 15 each year.  The date has become such a part of U.S. culture that many people simply call it “Tax Day”.  This year, however, for the 3rd time in 7 years, your federal income taxes will not be due April 15.  Instead, because of a combination of the calendar, a holiday, and tax law, Tax Day 2012 is delayed until Tuesday, April 17.

You will have two extra days to prepare and file your federal income taxes this year.  Here’s why.

First, April 15 is a Sunday and all federal offices are closed on Sundays.  This means that that taxes can’t be filed on April 15, as regularly scheduled.  Rather, the tax due date should roll over to the first available business day — Monday.  However, Monday, April 16 is Emancipation Day, a holiday in the District of Columbia since 2005.

Pay Your Mortgage Early, Boost Your 2011 Federal Income Tax Deductions

Friday, December 23rd, 2011

Increase your 2011 tax deductionsTime is running out to boost to your 2011 federal tax refund.  All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.  Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).  This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, homeowners who itemize their tax returns can apply their January mortgage payment’s interest portion to their 2011’s tax returns.  The alternative is to pay the mortgage on schedule and wait for April 15, 2013 to claim the credit.