The Mortgage Forgiveness Debt Relief Act has been extended through December 2013! The Mortgage Forgiveness Debt Relief Act was established in 2007 and was designed to to help struggling homeowners who sold their home through a short sale process. Homeowners were excused from paying taxes on the forgiven mortgage debt. This law was set to expire on December 31st 2012, but thanks to lawmakers in Washington, the law was extended as part of the deal to avoid the fiscal cliff.
What does this mean for Short Sale Sellers?
It’s great news! You can now avoid foreclosure and be excused from paying taxes on the deficiency on your loan from your lender. Without the tax break, the debt that is forgiven on your mortgage can be treated as taxable income, and already struggling homeowners would face taxes from a short sale or loan modification. This would create a great financial burden for homeowners who are upside down on their mortgage. For example, an underwater homeowner in the 25% tax bracket could pay $12,500 in taxes for a short sale in which his house sold for $150,000, but he previously owed $200,000. With the tax break, the homeowner would not have to pay taxes on the $50,000 of forgiven debt.
Back in November of 2012, a letter from chiefs with the Financial Services Roundtable, Center for Responsible Lending and Housing Policy Council to U.S. lawmakers stated: “This tax law has bipartisan support and is critical to helping homeowners and communities struggling with the ongoing foreclosure crisis. Furthermore, the housing market is beginning to show signs of a recovery, and expiration of this law would threaten that recovery,”
Thankfully our law makers listened and homeowners who are behind on their mortgage or facing foreclosure have one less thing to worry about. If you or someone you know are worried about whether or not a short sale is right for you, there is relief! If you are behind on your mortgage or you have already received a foreclosure notice, NOW is the time to consider a short sale!
For more information about whether or not a short sale is right for you, contact Karen Smith at 866-465-2736 for a FREE consultation. Choose the right agent to list your home.
Karen Smith is a Certified Distress Property Expert (CDPE) and a Short Sale and Forecloser Resource (SFR). Call today to get started. You may also complete the form below and we will contact you.