Tax Credits and Mortgage Forgiveness Act Reinstated by Fiscal Cliff Bill

Two main tax benefits that had expired were reinstated by the "Fiscal Cliff" policy recently passed by the federal government, along with an extension of the Mortgage Forgiveness Debt Relief Act.  Homeowners will be able to claim these tax credits on their 2012 taxes, according to a recent article In the Washington Post.

The American Taxpayer Relief Act allows you to write off the insurance premiums you paid during 2012 along with your mortgage interest, provided your household income does not exceed $110,000. The new bill retroactively permits write-offs for all of 2012 and 2013 for qualified borrowers.

If you had any energy-efficient renovations done in 2012 or plan to do them in 2013, you may be able to claim up to a $500 tax credit.  This incentive lapsed in 2011 but could now give you up to $500 off the bottom line of your federal tax return.  More information on the credits can be found at website for the Alliance to Save Energy.

In addition to the reinstated credits, the "Fiscal Cliff" legislation kept the Mortgage Forgiveness Debt Relief Act in force for 2013. This act protects homeowners who found themselves "underwater" with their home loans from incurring punitive federal taxes, which would have forced them to pay tax on the full amount of the short sale deficiency, as regular income. 

If this Act would have expired, it would have forced homeowners into a potential bankruptcy or a foreclosure situation, which could have proved devastating to homeowners.  On a larger scale, it would have had a vast impact on banks, as well as the local, state and national economy.