If you are a homeowner whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012 (i.e. due to foreclosure or short sale), you may be able to claim special tax relief and exclude the debt forgiven from your income.
The Mortgage Forgiveness Debt Relief Act is set to expire on December 31st, 2012. For those people considering short sale, the clock is ticking as homeowners who short sell or foreclose after this date may be subject to ten’s of thousands of dollars in tax liability.
For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit http://www.irs.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonment's. Please note that the Laura Kelley Realty Group and its Associates are not CPA’s or tax professionals and are not providing legal or tax advice