A piece of tax legislation signed last week by President Barack Obama extends several expired tax provisions designed to support homeowners by providing tax relief from mortgage debt forgiveness and tax credits for real estate investors.
On Dec. 18, Obama signed into law the Protecting Americans from Tax Hikes (PATH) Act of 2015, which was part of a $1.15-trillion omnibus spending package to fund the federal government through October 2016.
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The appropriations extend 50 different tax credits, including many that offer support for homeowners, property investors and small businesses. The legislation is supported by the National Association of Realtors (NAR).
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One provision protects homeowners with underwater mortgages from incurring a large tax bill on phantom income if they are able to work out a mortgage relief plan or conduct a short sale. This provision extends this assistance to homeowners through 2016.
The bill also includes a permanent extension of a 15-year cost-recovery period for the depreciation of qualified leasehold improvements, ensuring that a cost-recovery period remains permanently in place for improvements made to nonresidential commercial property.
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Other real estate-related provisions include the renewal of certain incentives to promote energy-efficient commercial and multifamily buildings, and a two-year extension of an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes.
The bill also eases restrictions on commercial real estate investments by making changes to the Foreign Investment in Real Property Tax Act (FIRPTA).
The PATH Act also permanently extends rules allowing small- and mid-sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years, which NAR said is important to Realtors, “who purchase new computers, copiers, cameras and even vehicles in the course of doing business.”
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“These tax extenders offer critical support for consumers, homeowners, commercial property investors and small businesses alike,” said NAR President Tom Salomone. “A strong economy requires certainty, and this proposal gives a healthy dose of it to millions of American taxpayers.”
