A tax break for doing a Short Sale, also known as forgiven mortgage debt, was set to expire Dec. 31 2012 &
It was extended by lawmakers when they dodged the “fiscal cliff” last week.
The tax break on Short Sales, which has been extended to the end of 2013, allows home owners facing Short Sales, reduced loan principals, or foreclosures to avoid paying taxes on any debt still owed to the bank. Otherwise, the debt would have been taxed by the IRS as income.
Sellers who are looking into doing a Short Sale, should still consult with there tax advisors, as everyone’s situation is different.
There is also Insolvency. What if you are insolvent?
A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as well, with being insolvent, while doing a Short Sale.
There’s plenty of information out there on the Debt Forgiveness Act & being Insolvent.
Click here for more info:
I still believe Short Sales can be the best option, “especially working with the right team” when you can no longer afford paying your mortgage payment.