Congress recently passed a much anticipated piece of tax legislation affecting real estate in Central Florida and across the country.
The tax extenders package includes a number of extensions for various expired tax provisions impacting homeowners, business owners and real estate investors alike. So what exactly is included in this package?
- A temporary extension on tax relief for mortgage debt forgiveness where homeowners are protected from incurring a large tax bill on phantom income while undergoing a short sale of their home. With this package, the extension will offer two additional years of relief for the 2015 and 2016 tax years.
- A permanent extension on a 15-year cost recovery period for the depreciation of qualified leasehold improvements. This provision guarantees that a cost-recovery period remains permanently in place for improvements made to nonresidential commercial properties.
- A renewal of certain incentives promoting energy efficiency in commercial and multi-family buildings, and a two-year extension on an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes.
- Changes to the Foreign Investment in Real Property Tax Act (FIRPTA) that will ease restrictions on investment in commercial real estate.
- A permanent extension allowing small- and mid-sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years. This is important to all business owners, including Realtors®, who purchase new computers, copiers, cameras and even vehicles for business purposes.
Like all legislation of this size, there are mixed emotions on the pros and cons associated with the passage of such a law. Nonetheless, for homeowners that had been waiting for word on whether they would be hit with additional taxes and businesses considering what equipment to invest in for 2016, this is likely to be welcomed news.