Impact of Fiscal Cliff on Olympia WA Real Estate Market
The house voted late on Tuesday night to pass a bill that moved the U.S. away from the Fiscal Cliff. The House avoided major cuts to spending and an overall tax increase on both the wealthy and middle class. This is the first time in over twenty years that the two sides of the house have come to an agreement in which taxes were increased. After much debate the house finally agreeded to comprise on deal that neither side got everything they wanted, but as President Obama promised taxes will increase on the top 2 percent of money earners in the U.S. The increase in taxes is estimated to raise $600 billion in revenues for the U.S. government.
While taxes will remain the same on those making less $450,000 (combined) or $400,000 individually, those over the threshold will indeed see their tax rates increased from 35.0% to 39.6% on everything over the aforementioned threshold. For the majority of Americans taxes will remain the same. The Child Tax Credit got renewed and expanded, as well as marriage penalty relief and Earned Income tax credit. All in all, the tax breaks will save the average family around $2,200 in tax increases.
So what does this mean for those in the market for a home, selling a home, even possibly falling behind on their mortgage?
Captial gains tax will increase 5% and will have wealthy homeowners who sell their homes to pay much more in taxes at closing. A similar increase in 2010 caused a slight spike in listings and prices dropped. Although, in the grand scheme of the economy, this will have minimal effect on the overall health of the econony. But, since there will be an increase in taxes it is definitely worth sitting down with your realtor to discuss options.
There is good news for distressed homeowners. The extention of the of the Mortgage Debt Relief Act 2007 was included in the fiscal cliff negotiation. The provisions include in the deal that excludes homeowners who either sell through short sale, get forclosed, or have their loans modified from paying taxes on debt.
Overall there is not much change occuring for potential homebuyers that don’t fall into the wealthy 2% of Americans. The most important thing is to be sure to remain fiscally responsable in uncertain times. Accounting for where your money goes can be the best plan for an uncertain market and economy.