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Transportation and Housing Provisions Included in Fiscal Cliff Deal
The U.S. Congress passed H.R. 8, the American Taxpayer Relief Act of 2012, on January 1, 2013, and President Obama signed the bill into law on January 2. H.R. 8 represents the compromise between Congress and the President to avert the so-called "fiscal cliff," a series of tax increases and across-the-board spending cuts originally scheduled to occur at the beginning of this year. The bill preserves lower tax rates for the vast majority of Americans and delays the implementation of spending cuts until March 1, 2013. CMAP wrote about the potential impact of automatic cuts to the federal transportation program, as well as potential policy responses, in a previous Policy Update.
The bill also includes transportation and housing provisions. It increases the pre-tax commuter transit benefit from $125 to $240 per month, creating parity between pre-tax transit and parking benefits. Transit benefits were temporarily raised to $230 per month as part of federal stimulus measures, but that higher rate expired at the end of 2011. The current increase in transit benefits will expire at the end of 2013.
In addition to increasing transit tax benefits, H.R. 8 also extended the Mortgage Forgiveness Debt Relief Act of 2007 through the end of 2013. The bill was originally set to expire at the end of 2012 and had already been extended from its original expiration in 2009. This act frees homeowners who receive principal write-downs or sell their home in a short sale from paying tax on the forgiven mortgage debt. Short sales provide an alternative to foreclosure and have become an increasingly critical part of the housing recovery. Recent data from Realtytrac estimates that short sales have risen to 21 percent of all home sales in Illinois, and that the average forgiven loan amount for foreclosure and non-foreclosure short sales was $87,769.