REMINDER: MORTGAGE FORGIVENESS DEBT RELIEF ACT EXPIRES ON 12/31/12
If you are in the process of doing a short sale on your home and it won't close (sell) until AFTER December 31, 2012, you should be aware that the tax consequences for sales/foreclosures of primary residences are about to change.
When a borrower sells a house on a short sale (or loses a house to foreclosure) and the lender forgives the debt, the lender will send the borrower a 1099C reflecting the amount of the debt forgiven. Prior to 2007, the amount on the 1099C was considered taxable income to the borrower.
In 2007, Congress passed the Mortgage Forgiveness Debt Relief and Debt Cancellation Act ("the Act"). The Act provides that debt forgiven on a PRIMARY residence will not result in taxable federal income so long as the mortgage was used to purchase the home, refinance the home or make improvements to the home (i.e., the client did not take equity out of the house). The amount of debt forgiven on short sales of investment properties is taxed.
The Act is set to expire December 31, 2012. Therefore, any clients who sell after December 31, 2012 WILL BE TAXED on the debt forgiven, unless Congress agrees to extend the Act beyond December 31, 2012. We will keep you posted.
In the meantime, please contact your senators, congressman and attorney general to push for this to get extended by Congress before the end of the year. If this law expires, less short sales are the likely result.
Call anytime @ 404.432.1844
In & Around Atlanta Real Estate Blog - Copyright 2006 - 2014 by Kerry Lucasse and the Nest Atlanta team with eXp Realty Atlanta. All information contained in this blog is deemed to be reliable but not guaranteed. If you need assistance with Intown Atlanta real estate, Kerry Lucasse and the Nest Atlanta Real Estate Group are always available to assist you with your residential real estate needs!
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