One of the questions I get asked often is: Am I going to have to pay Income Tax on the difference between what I owe on the mortgage and what the Selling Price is for the Short Sale?
Well I use to say “probably but check with your tax advisor”.
The fact is prior to 2007 Homeowenrs who had a short sale or even a foreclosure were subject to PAY INCOME TAX on ANY Amount of Forgiven Debt.
Then in 2007 the US Government signed into law the “Mortgage Relief Act”. Which provided Homeowners who were primary residence relief up to $2 Million for married couples and $1 Million for individuals. this relieved them from any shortgage being treated as income by the IRS.
*Lenders must fomally forgive the debt or loan.
This should be a Huge factor if you are behind on your mortgage payment or foresee that you will soon be unable to continue making payments…Take Heart. I am here to Help you but here is the Key: You must act soon. You have until December 13, 2012 to complete the short sale, because the government is removing this relief act and starting January 1, 2013 Any debt forgiven, even on primary residence will be treated as INCOME by the IRS and subject to taxes.
So give me a call to see if this will pretain to you today. I am here to help you and your information is confidential. Check out my Short Sale Blog.
It is written to explain some of the questions and situations that come up in short sales. www.CapeCoralShortSales.info
or check out some of my videos; https://youtu.be/b-PAOb2hKSE
Donna Bishop, Jones & Co. Realty (239) 560-3149 or email; firstname.lastname@example.org