Mortgage Forgiveness Act
Hi everyone, a lot of people from homeowners, real estate investors and realtors have asked me alot about:
”will I get taxed on a short sale” or “will my client get taxed on the difference of the short sale” meaning that if a house has $300,000 owed and is short-saled at $200,000…the IRS would see that $100,000 as income to the homowner and we all now for goodness sake, he/she would not be able to afford paying that $15,000 to $33,000 (depending on your tax bracket) to the IRS as they were in foreclosure due to financial difficulties. To top it off, if you declare bankruptcy, the one debt you can’t walk away from even in BK court…is the IRS debt!
The quick summary of it:
Straight from an exclusive interview with an attorney that represents major lenders:
Bush did sign a mortgage debt relief act which allowed some mortgage debts not to be taxed. It has to a principal residence and meet other requirements (not a refinance loan), etc. I have attached it here for you and your friends who may be interested.
Here is the actual Mortgage Forgiveness Act in Adobe PDF format:
Right Click here to download Mortgage Forgiveness Act.
Here is another excerpt from an attorney firm:
The Mortgage Forgiveness Act of 2007 was signed into law yesterday and is now official effectively getting rid of the question “will I be taxed on the Short Sale”.
Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower. This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get “hit with taxes” on the Short Sale.
The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2009.
This will effectively put an end to the question from Sellers . . . will I be taxed on the Short Sale discount. The definitive answer (at least until the end of 2009) is NO!
