How can the Mortgage Debt Relieft Act of 2007 benefit an Orlando short sale seller?
Before the passage of this law any debt that was forgiven in a short sale or a foreclosure would require the homeowner to receive a 1099 form from their lender. This 1099 form required the homeowner to report this forgiven (or cancelled) debt as income.
So here is the good news:
From January 1, 2007 to December 31, 2012 this law eliminates the phantom tax on debt cancellation in mortgage discharge! After a successful short sale you may not have to pay income taxes on the forgiven debt!
Here are the basic guidelines to qualify for this act:
- Debt must have been incurred to acquire a principal residence.
- Cancelled debt up to $2,000,000 is eligible.
- Debt from a second (non-acquistion) mortgage or HELOC is not eligible.
- Cancelled debt from investment properties and second homes are not eligible.
For detailed information please refer to a licensed tax professional.
It is also very important to realize that the amount of default with a foreclosure will be much greater than with a short sale.
This is for informational purposes and does not constitute legal or tax advice. Please seek appropriate legal counsel.
If you need assistance with the short sale of your home please call 407-619-6249 or email thomas@thomasstaples.com.
Now you know How can the Mortgage Debt Relieft Act of 2007 benefit an Orlando short sale seller?
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