Mortgage Forgiveness Debt Relief Act Extended
As part of the American Taxpayer Relief Act of 2012, or the fiscal cliff bill, passed by Congress on Jan. 1, a one-year extension has been approved for the Mortgage Forgiveness Debt Relief Act! This is GREAT NEWS!!!
The Motgage Forgiveness Debt Relief Act was created in 2007 to provide home owners with a tax exemption when short selling their homes and receiving debt forgiveness. Prior to this, individuals who sold their home via a short sale where hit with taxes for the forgiven debt. If a seller say sold their home for $200,000 and their lender took a loss of say $50,000, then the seller would be responsible for a taxable income of $50,000 to the Federal government.
Luckily, the Act ensures that that debt forgiven by seller’s lender during the short sale process is exempt from federal taxes!
The Mortgage Forgiveness Debt Relief Act of 2007 was set to expire at the end of 2012. Myself and many of my clients who were in the middle of a short sale where patiently waiting and hoping that that this act would be extended. Luckily, for our current clients and future clients, it was extended and has allowed short sales to continue to be the better alternative to foreclosures for all parties involved. Short sales are win-win for both the sellers and lenders and fortunately the act was extended!
The Mortgage Forgiveness Debt Relief Act is now set to expire on January 1, 2014 and only applies to a primary residence. Lets hope that a year from I will be writing another article stating that the Mortgage Forgiveness Debt Relief Act was extended again yet again!
For more information about this act and to learn more about short sales please call us at 781-591-0799. We look forward to help you today!