Homeowners facing the possibility of short sale or foreclosure got a little bit of good news this month. As part of the “Fiscal Cliff” deal reached by Congress, the Mortgage Forgiveness Debt Relief Act was extended until the end of 2013. According to Forbes.com, homeowners who go through a short sale or foreclosure (on their primary residence) will be able to avoid the resulting taxable income on the forgiven debt (up to $2 million or $1 million if married filing separately).
This is the second time that the law has been extended. But there is no guarantee that the law will be extended for a third time, which means that homeowners who may need to do a short sale should start the process soon. Short sales can take several months (or longer) to complete.
If you’re considering a short sale and have questions about the tax ramifications, it is a good idea to speak with a CPA or attorney (let me know if you need some referrals). Or if you just have questions about the short sale process, just give me a call or send me an email.