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Suzanne Macdowell's Blog

By Suzanne MacDowell | Agent in 07856

The “Fiscal Cliff” and your home

The eleventh hour vote in Congress to avoid the "fiscal cliff" included a provision that extends the Mortgage Forgiveness Debt Relief Act through 2013.  The debt relief act, which was scheduled to expire at the end of 2012, stops the forgiven debt on a mortgage, due to a short sale, from being counted as taxable income by the Internal Revenue Service.  Many homeowners do not even realize that, prior to 2007, the forgiven debt was counted by the IRS as income.  For example, a homeowner who owes $150,000 on the mortgage and short sells for $100,000 would have been taxed on the $50,000 difference. If the homeowner was in a 20% tax bracket, the amount owed would be $10,000, quite a substantial burden.   

Other real estate provisions in the fiscal cliff bill included the deduction for mortgage insurance premiums for filers making less than $110,000 and the 10% tax credit (up to $500) for energy improvements to existing homes.  The deductions are extended through 2013 and made retroactive to cover 2012 as well. The tax break for mortgage insurance covers private mortgage insurance as well as mortgage insurance provided by the Federal Housing Administration, the Veterans Affairs and the Rural Housing Service. 

These provisions are very good news for America’s real estate market and for home owners in general, but especially for homeowners whose properties are underwater.  Including these items in the bill was the right thing to do.


If you or someone you know is struggling to meet their mortgage obligations, call me.  There is no guarantee the Mortgage Debt Forgiveness Act will be extended again at the end of 2013.  Short Sales can be tedious and take a long time to close.  It is important to ACT NOW! 

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