Housing-Related Tax Rules That Expired at the End of 2013

At the end of 2013, a number of housing-related tax provisions expired. Collectively, these housing and other tax rules are part of a set of policies known as “tax extenders,” which have traditionally been extended every year or so.

While there is growing support for extending most, if not all, of these provisions, a potential debate on comprehensive tax reform may delay any Congressional effort to extend these rules. If such a delay carries through until late 2014, perhaps in a lame duck session after the election, then it is possible that a future extension may not be retroactive for 2014. In the past, Congress has enacted retroactive extensions, but such actions cannot be relied on for the future.

Thus, homeowners, builders, remodelers, and other real estate professionals are well advised to consider that it is possible that these provisions may not be part of 2014 tax law.

Another complicating factor for the tax policy agenda in 2014 is the news that Senate Finance Committee Chairman Max Baucus will be resigning to become the U.S. ambassador to China. While it is expected that Senator Ron Wyden will become the next chairman of the committee, what impact this transition will have on tax extenders is uncertain.

The following housing or real estate related tax provisions expired at the end of 2013:

Housing Rules

  • Mortgage debt forgiveness tax relief: rule that prevents tax liability arising from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt.
  • Deduction for mortgage insurance: reduces the after-tax cost of buying a home when paying PMI or insurance for an FHA- or VA-insured mortgage; $110,000 AGI phase-out.
  • The section 25C energy-efficient tax credit for existing homes: remodeling market incentive with a lifetime cap of $500.

Business Rules

  • The section 45L new energy-efficient home tax credit: allows a $2,000 tax credit for the construction of for-sale and for-lease energy-efficient homes in buildings with fewer than three floors above grade.
  • The 9% LIHTC credit rate: absent the credit fix, the LIHTC program would suffer a loss of equity investment for affordable housing projects; in place for 2013 allocations.
  • Base housing allowance rules for affordable housing: income definition rules.
  • The section 179 small business expensing limits: offers cash flow and administrative cost benefits for small firms, with limits of $500,000 for deductions and $2 million for capital purchases.
  • The section 179D deduction: provides a deduction for some energy-efficient upgrades to multifamily and commercial properties.
  • New Markets Tax Credit: no new allocations of this community development tax credit.
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8 Responses to Housing-Related Tax Rules That Expired at the End of 2013

  1. […] of the housing finance system and tax reform, as well as smaller issues concerning the future of housing-related tax provisions that expired at the end of 2013, can also have impacts in the coming year. And immigration reform could have significant effects for […]

  2. […] the end of 2013, a number of housing and real estate-related tax policies expired. These include the energy tax credits for new home construction (45L) and existing home retrofits […]

  3. […] policy item that could also affect existing home sales is the recent expiration of the tax exclusion for mortgage debt forgiven. A tax extender item that expired at the end of 2013, the sunset of the tax exclusion may reduce […]

  4. […] The 25D credit is scheduled to remain in law until the end of 2016. The 25C credit expired at the end of 2013, although it may be extended along with other “tax extenders,” later in 2014. […]

  5. […] For example, from 2009 through the end of 2010, the 25C credit for existing homes was available as a 30% credit and $1,500 limit. After the extension of the “tax extenders” legislation at the end of 2010, those rules were pared back and retained when the credit was extended again as part of the Fiscal Cliff deal. Among those rule changes, the credit was reduced to a 10% rate and a $500 lifetime cap was imposed. It is worth noting that this version of the credit, along with many other tax extenders, expired at the end of 2013. […]

  6. […] decade has been the almost annual process of addressing a set of expiring rules known as “tax extenders.” While these 60 or so provisions have been repeatedly extended, they are typically only […]

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