William Process
A significant piece of tax legislation was recently signed into law, which includes the extension of a number of expired tax provisions important to supporting homeowners and real estate investment. These tax extenders offer critical support for consumers, homeowners, commercial property investors and small businesses alike.
A portion of the tax extender package extends the Mortgage Debt Relief Act. This Act protects underwater homeowners from incurring a large tax bill on phantom income in connection with a workout or a short sale. Since 2007, this tax relief has strengthened individual communities and the broader economy as more distressed homeowners were offered the flexibility to responsibly address an underwater mortgage. The tax extenders offer an additional two years of protection covering tax years 2015 and 2016.
Homeowners who are still struggling through the short sale process should have the same tax relief as those who short sold their homes in the earlier years. The good news is that traditional sales now dominate the real estate market, but we are not entirely out of the short sale market yet. Here’s a look at what the extension of the Mortgage Debt Relief Act means locally: (See table).
The recently pass legislation also includes a permanent extension of a 15-year cost recovery period for the depreciation of qualified leasehold improvements. This provision ensures that a common-sense, cost-recovery period remains permanently in place for improvements made to nonresidential commercial property.
Real-estate related provisions also include the renewal of certain incentives to promote energy efficient commercial and multifamily buildings. Also, an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes is extended for an additional two years under the bill.
The legislation permanently extends rules allowing small–and mid–sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years. This is important to business owners who purchase new computers, copiers, cameras and even vehicles in the course of doing business.
Finally, the tax bill also includes changes to the Foreign Investment in Real Property Tax Act (FIRPTA) that will ease restrictions on investment in commercial real estate.
Members of the National Association of REALTORS® are committed to protecting private property rights and advocate on behalf of all homeowners.
We are very pleased that Congress recognized the significant role real estate plays in the economy and the need for these tax extenders.
William Process, is the 2016 president of the Reno/Sparks Association of REALTORS, and a Realtor with Homegate of Nevada.
