Mortgage Forgiveness Debt Relief Act
The Debt Relief Act provision that exempts homeowners from paying tax on forgiven debt through short-sales was set to expire at the end of 2012. With the “fiscal cliff” deal, the Act was extended through the end of 2013. With this, short-sales will continue to be easier for underwater homeowners to stomach as tax liability isn’t a concern. Usually, without the Act, the debtor would receive a 1099 for the amount of debt forgiven and the IRS would consider it taxable income. Depending on the difference in loan amount and sale price, this would have introduced a significant tax liability without the Mortgage Forgiveness Debt Relief Act in place.
Energy Tax Credit
The $500 energy tax credit was also extended through 2013 and made retroactive to January 1, 2012, so you can use the credit for purchases made in 2012. Those who have used the credit in recent years are still limited to collecting a total benefit of $500 throughout the life of the program. For instance, if you have received $300 worth of credits in previous years, you are limited to using $200 worth of credits. Credits are available for insulation, ENERGY STAR doors and windows, and high-efficiency water heaters, furnaces, and air conditioners.