If you are an upside down homeowner the time to take advantage of the short sale benefits that the Federal Mortgage Forgiveness Debt Relief Act provides is coming to an end in 2012.
is scheduled to run out on 12/31/2012. This debt relief act gives the homeowner who has had to pursue a short sale or a loan modification or a foreclosure, the ability to avoid paying taxes on the loss to the banks.
If you are considering a short sale on your home or a loan modification or have decided on the option of a foreclosure – don’t wait too long to or you could find yourself facing a huge tax bill.
If you have a home that goes to foreclosure or decide that the better option of a short sale is in your best interests, the difference in what you owe on the home (plus foreclosure costs) and what it sells for, is considered by the IRS as normal income received by you. The lender reports this loss in the form of a 1099 to the IRS, and to you,
If you wait too long – on December 31, 2012,
The Federal Mortgage Forgiveness Debt Relief Act of 2007 was signed in to law to you from incurring tax deficits after losing a home, and provide the following benefits which would apply to a short sale or a foreclosure or a loan modification:
- Maximum of $2 million of debt forgiven between Jan. 1, 2007, and Dec. 31, 2012.
- The forgiven debt is only allowed on a principle residence – lived in two out of the last 5 years
- A home equity line of credit may qualify if the loan was used to improve your principle residence
A short sale does take several months to complete – so if you need to avail yourself of the short sale option – now is the time to act. Don’t lose out on the benefits provided in the Debt Relief Act by waiting too long.
Do you want to know if you can get your home sold thru the short sale process? Call me and let's find out.