Five years ago Congress passed the Mortgage Forgiveness Debt Relief Act of 2007.
This allowed taxpayers to exclude from their taxable income, the amount of debt that was forgiven or canceled by their lender.
Under federal tax code, forgiven debt (read short sale) was considered by the IRS as income.
As an example:
If you owed $250,000 and your lender forgave $50,000 of that debt in a $200,000 short sale or loan re-finance, that $50,000 was considered income.
If your combined federal and state marginal tax rate was 36%, you would owe $18,000 in taxes.
For the past 5 years, sellers were free of this obligation…
…..but this tax break is due to expire on December 31, 2012, and there is no indication that lawmakers are considering an extension.
NOW is the time to talk to us about the possibility of a SHORT SALE!
Call us today! We have the skills, training & strategies to help you with your Real Estate needs!
- Short Sale Tax Relief Set to Expire; Realtors and Sellers Unaware (geoffreyrealtor.wordpress.com)
- How To Report Debt Canceled on Form 1099-C (turbotax.intuit.com)
- What Short Sale Homeowners Should Know (bringyouhome.wordpress.com)