Mortgage Relief Tax Act- Will I owe the IRS if I Short Sale?
The Mortgage Relief Tax Act AKA Mortgage Forgiveness Debt Relief Act of 2007 was set to expire at the end of 2012 but has been extended to the end of 2013. This is great news for you if you are still in a property that’s underwater.
Without the Mortgage Relief Act if you sold a property and debt was forgiven, the forgiven amount could be considered income and may be taxable. For example, if you sell your house for $100,000 but you owed $200,000, even if your mortgage company agreed to let you short sale, you would be responsible for paying taxes on the $100,000 that was forgiven putting you in a very bad situation with the IRS. There are restrictions on this tax act, please contact your CPA for additional information given your particular situation.
What many don’t understand is that taxes are due on this deficiency whether you short sale or foreclosure so this tax act is very important to thousands across the country.
If you have an underwater property and think you may not be able to afford it long term, you may want to speak to a CPA and possibly a real estate attorney and of course a great Short Sale agent about your options.
RESOURCES
If you think doing a short sale might be an option for you, we have a short sale website that will provide more information. Visit http://www.GOwithShortSale.com for more information on the short sale process.
Additionally, this is a link to the IRS website where you can get additional details about the Mortgage Relief Tax Act, AKA Mortgage Forgiveness Debt Relief Act of 2007- http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
