Home prices are inching up across the country, as a housing recovery ripples through once hard-hit areas. AOL Real Estate, drawing from Trulia housing data, recently highlighted the top “turnaround housing markets” that have seen the biggest jumps in median home prices in the year of 2012.

1. Las Vegas, NV
◦ Median home price for fourth quarter of 2012: $147,000
◦ Difference in prices between 2011-2012: +27.5%

2. Seattle, WA
◦ Median home price: $299,950
◦ Difference in prices between 2011-2012: +24%

3. Phoenix, AZ
◦ Median home price: $189,000
◦ Difference in prices between 2011-2012: +21.8%

4. Oakland, CA
◦ Median home price: $384,750
◦ Difference in prices between 2011-2012: +21%

5. San Jose, CA
◦ Median home price: $589,950
◦ Difference in prices between 2011-2012: +20.8%

6. Salt Lake City, UT
◦ Median home price: $159,000
◦ Difference in prices between 2011-2012: +18.9%

7. Atlanta, GA
◦ Median home price: $159,000
◦ Difference in prices between 2011-2012: +18.9%

On January 1 both the Senate and House passed H.R. 8, legislation to avert the “fiscal cliff.” The bill will be signed shortly by President Barack Obama.
Below are a summary of real estate related provisions in the bill issued by National Association of Realtor (NAR) —

Real Estate Tax Extenders

• Mortgage Cancellation Relief is extended for one year to January 1, 2014
• Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
• Leasehold Improvements: 15 year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012.
• Energy Efficiency Tax Credit: The 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

Permanent Repeal of Pease Limitations for 99% of Taxpayers

Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.  These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000.  These thresholds have been increased and are indexed for inflation and will rise over time. Under the formula, the amount of adjusted gross income above the threshold is multiplied by 3%. That amount is then used to reduce the total value of the filer’s itemized deductions. The total amount of reduction cannot exceed 80% of the filer’s itemized deductions.
These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years. They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012.  Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.

Capital Gains

Capital Gains rate stays at 15% for those the top rate of $400,000 individual and $450,000 joint return. After that, any gains above those amounts will be taxed at 20%.  The 250/500k exclusion for sale of principle residence remains in place.

Estate Tax

The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax. After that the rate will be 40 percent, up from 35 percent.  The exemption amounts are indexed for inflation.

The Senate bill that finally passed the House by a 259-167 vote extended a number of federal tax code provisions that are important to homebuyers, sellers, builders and real estate professionals.

The bill also made permanent the Bush-era reduced tax brackets for all but the highest income earners in the country, along with a permanent “patch” to the increasingly troublesome alternative minimum tax (AMT) that threatened millions of middle-income homeowners with higher taxes.   Here’s a quick overview of what the legislation means for housing:

Mortgage Forgiveness Debt Relief extended through 2013

For huge numbers of financially distressed owners of homes with underwater mortgages, this was the biggest issue in the entire fiscal cliff debate. The mortgage debt relief provisions in the tax code, first enacted in 2007, expired at midnight Dec. 31.

Had Congress not acted, the tax code would have reverted to its pre-2007 treatment of mortgage principal reductions or cancellations by lenders, whether through loan modifications, short sales, deeds-in-lieu or foreclosures: All principal balances written off would be treated as ordinary income to the homeowners who received them.

For illustration, if a lender wrote off $100,000 of debt to facilitate a short sale, the seller would be taxed on that $100,000 at regular marginal rates, just as if he or she had earned it as salary.   A return to taxation of principal reductions would have disrupted short sales — a growing segment of the home real estate market — in 2013, and almost certainly would have encouraged more distressed owners to opt for foreclosure and bankruptcy.

Deduction of mortgage insurance premiums

The bill retroactively extended this benefit to cover all of 2012, plus continues it through 2013. Qualified borrowers who pay private mortgage insurance premiums or guarantee fees on conventional, low down payment home loans, FHA, VA and Rural Housing mortgages will be able to write off those premiums along with their mortgage interest on federal tax returns. The retroactive feature is crucial because Congress had allowed this deduction to lapse at the end of 2011. There are limitations, however: The write-off is available only to borrowers who have an adjusted gross income below $110,000.

Tax credits for energy-efficiency home improvements

This benefit provides modest tax credits of $200 to $500 for owners who install energy-efficient windows, insulation and other upgrades designed to cut energy consumption. The bill covers improvements made during 2012 and 2013.

Tax credits for new energy-efficient new houses

This allows builders and contractors to claim a $2,000 tax credit on new homes constructed in 2012 and 2013 that meet federally specified energy-conservation standards. The bill also extends credits for U.S.-based manufacturers of energy-efficient refrigerators, clothes washers and dishwashers. As with other energy-related tax provisions, this had expired last year and will now be continued through 2013.