Forth Hoyt, Folsom Short Sale Agent and Experienced Folsom Short Sale Specialist answers the question: Has the Mortgage Debt Relief Act Been Extended? What are the Tax Implications of a Short Sale?
Here’s some good news for financially stressed homeowners looking for options:
Five years ago, Pres. Bush Signed the Mortgage Debt Relief Act of 2007, that would prevent households from having to treat certain types of forgiven mortgage debt as taxable income. Prior to the law being passed, homeowners owed taxes after a short sale, taxes after a foreclosure and taxes on a loan modification.
The Mortgage Debt Relief Extension could ultimately affect millions of families who are underwater on their loans, and heading for foreclosure, short sales or deeds-in-lieu of foreclosure settlements and loan modifications.
Under the federal tax code, all types of forgiven debt are treated as ordinary income, subject to regular tax rates. When an underwater homeowner who owes $300,000 has $100,000 of that forgiven as part of a modification or other arrangement with the bank, the unpaid $100,000 balance would normally be taxable.
This law changes that and saves families from a terrible hit after an already huge loss.
But it is set to expire...
Earlier this month, the Senate Finance Committee passed a one-year extension, as part of a broader tax package, on a 19-5 vote. Capitol Hill observers expect Congress to ultimately pass an extension of the Mortgage Debt Relief Act through 2013 as part of a series of broader tax measures that will come before lawmakers before the end of the year.
As a Folsom, El Dorado Hills Short Sale Specialist, I am following this closely so I will keep you posted..
Here are some sources:
Will I Owe Taxes On A Short Sale?Will I Owe Taxes On A Short Sale?
mortgage debt relief extension mortgage debt relief extension
Debt relief law expires Dec. 31Debt relief law expires Dec. 31
Expiring Mortgage Debt Relief Act Fuels Strategic Default: SurveyExpiring Mortgage Debt Relief Act Fuels Strategic Default: Survey
Questions about your particular situation? Questions about your particular situation?
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