Family Owned Construction Firms Gain Help From Congress - Fiscal Cliff Becomes A Series Of Mini-Cliffs
The Senate and House passed amendments to H.R. 8, January 1, 2013, offering extension of tax relief and avoiding the "fiscal cliff" in lieu of mini-cliffs. It means immediate benefits to homeowners and home builders - and up-coming mini-cliffs. The Senate passed a compromise measure extending Bush-era homeowner tax breaks for the vast majority of Americans and spare tens of millions from the Alternative Minimum Tax.
Impact On Household Wealth
"The late night compromise reached by the White House and Congress holds at bay the fiscal cliff’s automatic tax increases and federal spending cuts which involve programs important to real estate and impact construction owners and household wealth,",says Butch Sprenger, owner of Destiny Homes, a Minneapolis home builder. Perhaps the reality check dealt by the cliff unknowns and cautious tone of analysts has prepared the way for homeowners to profit as markets are now in a more realistic mood, expecting mediocrity at best.
Temporary Extension Of The American Taxpayer Relief Act
Year to year, construction spending gained substantially.
The enactment of H.R. 8, the American Taxpayer Relief Act of 2012 salvages most of the 2001/2003 homeowner tax cuts and family-owned construction firms by a temporary extension. "The legislation prevents a fiscal drag of approximately $600 billion in 2013, which would have been large enough to push the current weak economy into recession. That in turn would have reduced demand for both owner-occupied and renter housing and threatened the ongoing recovery for home building", according to the National Association of Home Builders (NAHB).
Homeowners Do Best Saving For Home Expenses And Protecting Home Equity
Current Benefits Gained For Construction Firms
The major fiscal cliff threat had been temporarily averted, however it will continue challenging Minneapolis construction firms as it spins into mini-cliffs.
Permanently extends the 2001/2003 tax rates for adjusted gross income levels under $450,000 ($400,000 single); good for small business and home builders, 80% of whom are pass-thru entities who pay taxes on the individual side of the code
Permanently extends the Alternative Minimum Tax (AMT); again, good for small business owners who are frequently at risk of paying AMT. The AMT is permanently adjusted for inflation, making it unnecessary for Congress to adjust it each year.
Permanently sets the parameters of the estate tax; which benefits family owned construction firms; and put to code the 2010 $5 million exemption amount (indexed to inflation) and a 40% estate tax rate. The top rate is $10 million for family estates.
Extends present law section 179 small business expensing through the end of 2013; which is important for basic cash flow and offers administrative cost benefits for small firms
Extends the section 45L new energy-efficient home tax credit through the end of 2013; allows a $2,000 tax credit for the construction of for sale green homes and for-lease energy efficient homes in buildings with fewer than three floors above grade
Senate and House Passed H.R. 8, Legislation To Forestall the “Fiscal Cliff.”
Here is summarized list compiled by Destiny Homes of key provisions in the bill that will impact residential construction and the housing market:
Mortgage Cancellation Relief was granted a one year extension to Jan. 1, 2014. This is vital help for homeowners who gained a modification and those who struggled to make mortgage payments and forfeited their home due to foreclosure or short sale.
The 10 percent homeowner tax credit of up to $500 for energy improvements made to renovate existing homes is extended through 2013 and made retroactive to back throughout 2012.
The homeowner deduction for Mortgage Insurance Premiums for individuals / families making under $110,000 is extended through 2013 and made retroactive to cover 2012
Census Bureau Construction Spending November 2012
In the year to year bigger picture, construction spending gained substantially.
The U.S. Census Bureau of the Department of Commerce announced yesterday that construction spending during November 2012 was estimated at a seasonally adjusted annual rate of $866.0 billion, 0.3 percent (±1.6%) lower than the updated October estimate of $868.2 billion. November 2012's figure is 7.7 percent (±2.0%) higher than the November 2011 estimate of $804.0 billion.
Destiny Homes, a family owned construction firm , owner Butch Sprenger says, "While November's results are lower than our October reportings, a broader stroke view is important. ". In year to year comparisons of the first 11 months of this year, construction spending totaled $781.4 billion, or 9.2 percent (±1.3%), well surpassing $715.4 billion recorded for the same period in 2011, according to the Census Bureau Construction Spending Report.
Mini-Cliffs Just Ahead
U.S. family owned construction firms and homeowners hope the next challenges are indeed mini-cliffs compared to our recent fiscal cliff threat to homeowners. The New Year's Day agreement pending a climactic fiscal showdown in the final hours of the 112th Congress —was averted temporarily - setting up a new showdown in the weeks to come. Home builders, largely comprised of family owned construction firms, are credited for contributing enormously to our improving housing market.
1. Debt Ceiling: A report in July by the Government Accountability Office said the 2011 debt ceiling fight wasted $1.3 billion in taxpayer money because of the uncertainty it wrought on the complex task of federal borrowing. The fiscal cliff deal does not fix the issue of when and if lawmakers raise the debt ceiling, setting up a major mini-cliff (hopefully speaking) in February.
2. Demands for Budget Resolution: A need to get past short-term fixes as lawmakers deliberate over the right spending levels for each federal agency and create a budget.
3. Sequester: Automatic cuts in federal spending that are necessary to reduce the budgets of most agencies and programs by 8% to 10%.
Federal Taxes Increase For 77% Of Americans
CBS's Money Watch says, "The wealthy aren't the only ones with higher taxes as a result of the 'fiscal cliff' deal: Federal taxes will go up for 77 percent of Americans because of the expiration of the two-percentage-point payroll tax cut. This could have a bigger impact than anything else in the new law". Small business family-owned construction firms make up the largest portion of U.S home builders. As the backbone to the housing recovery and economy, construction owners are intent to continue the momentum well into 2013. While most of us may not be quick to absorb that opinion, Asian and European stocks post favorable gains, while government bonds in weaker eurozone economies rally as investor appetite for riskier assets rise on the diminished threat of an immediate hit to the housing recovery's growth in the U.S. economy.
Homeowner Tax Benefits
Homeowners have immediate benefits to take ease from, along side family owned construction financial firms. Specific homeowner benefits include:
Extends through the end of 2013 mortgage debt tax relief; important rule that prevents tax liability from many short sales or mitigation workouts involving forgiven, deferred or canceled mortgage debt
Deduction for mortgage insurance extended through the end of 2013; reduces the cost of buying a home when paying PMI or insurance for an FHA or VA- insured mortgage; $110,000 AGI phaseout remains.
The fiscal cliff deal extends the section 25C energy-efficient tax credit for existing homes through the end of 2013; which is a key home remodeling market incentive, the existing lifetime cap continues at $500.
Reinstates the Pease/PEP phaseouts for tax deductions; for married taxpayers with Average Gross Income (AGI) over $300,000 or $250,000 if single, the Pease limitation reduces total itemized deductions by 3% for the dollar amount of AGI above the allowed thresholds.
"Considering there are so many headwinds facing the economy, including the debt ceiling negotiation in 60 days, the smart money knows the bullish sentiment will be short-lived." ~ Todd Schoenberger, managing partner at LandColt Capital
Contact Destiny Homes to build a home or begin a major home renovation project in the Minneapolis and St Paul housing market. If you are considering a move in the Minneapolis / St Paul area, first gain professional advice to weigh personal options by calling 952-923-5706.
Download the National Association Of Home Builders Article on Fiscal Cliff Temporarily Avoided And What It Means To Home Builders
Download the Census Bureau Construction Spending Report for November 2012
Butch and Liz Sprenger, owners of Destiny Homes Remodeling And Renovation Services Home page: www.destiny-homes.com. Service the entire Twin Cites Metro, from our main office in Deephaven, MN working as home Remodeler and owner of Destiny Homes.