Mortgage Forgiveness Debt Relief Act Expires Dec 31 2012!
If you've been thinking about doing a short sale on your North Georgia home, you might want to hurry. The Mortgage Forgiveness Debt Relief Act is set to expire on December 31, 2012
If you've been thinking about doing a short sale on your North Georgia home, you might want to hurry up. The time is limited for homeowners who want to ensure they aren't hit with a big tax bill because they had to walk away from a mortgage obligation. The Mortgage Forgiveness Debt Relief Act is set to expire on December 31, 2012.
At the height of the housing crisis, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, designed to provide some consolation to folks who had lost their homes.
In summary, the Mortgage Forgiveness Debt Relief Act states that if you borrow money (up to $2 million dollars) from a bank or a commercial lender and the lender cancels or forgives the debt (a.k.a. Short Sale) then you are not responsible for paying taxes on the forgiven amount. This applies only to primary residences, NOT investment properties.
The Mortgage Forgiveness and Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012. It has not yet been determined if the Mortgage Forgiveness Act will be extended past 2012.
Upon the completion of a successful short sale transaction, your bank is required by law to provide the IRS with a Form 1099-C. The 1099-C will show the IRS the amount of debt which was cancelled or forgiven. Before December 20, 2007, (this is the date which the Mortgage Forgiveness Debt Relief was enacted) the amount of forgiven debt was considered to be taxable income. This is no longer the case for primary residences; however, all this could change if the Mortgage Forgiveness Act is not extended.
One of the most frequent questions we are asked regarding short sale transactions involves the tax consequences of these situations. There is a tremendous amount of mis-leading and 'completely false' information floating around on the internet. Of course as a Realtor, we are not licensed to give tax advice, and thus will strongly suggest that you always consult with a licensed CPA or attorney when dealing with these matters; however, please click the attached link to view the Mortgage Forgiveness Debt Relief Act as it appears on the IRS web site (click link) http://www.irs.gov/individuals/article/0,,id=179414,00.html
We have helped hundreds of Georgia families avoid foreclosure. Sellers facing foreclosure must remember that banks are not looking out for you or your family. When you work with me and my team, our job is to get between you and the bank. We represent our clients, NOT the banks. It is our job to negotiate the best possible outcome. Ultimately, our job is to take away the stress, protect our clients assets, and make the transaction as smooth and stress-free as possible.
Fred Yancy, Broker