If you have been thinking about short selling your house you might want to start the process sooner rather than later. If you decide to short sell your property and the sale does not close until after December 31, 2012 you could incur Federal income tax liability for the amount of the forgiven debt. Currently, The Mortgage Debt Relief Act of 2007 (“MDRA”) allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure or short sale qualifies for the relief. The MDRA expires at the end of 2012 so debt forgiveness that would be non-taxable through December 31, 2012, would become taxable starting January 1, 2013. While it is possible that Congress could extend the deadline for the MDRA there is no indication at this time that it will. In short, if you or one of your friends has been contemplating a short sale, the time to act is now. For more information please visit the IRS website at http://www.irs.gov/individuals/article/0,,id=179414,00.html or consult your tax professional.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized