Now the Mortgage Relief Act of 2007
says that under certain circumstances, which most homeowners will qualify, the
IRS and State Franchise Tax Board (FTB) will agree to waive their right to
collect income taxes on the forgiven debt. This law is set to expire December
31, 2012. There are bills in Congress to extend this act but none have been as
yet approved.
Let’s think about that for a minute.
An underwater homeowner loses their home to foreclosure. For sake of argument
we’ll say the unpaid balance is $100,000. If that now former homeowner is in
the 25% tax bracket, they will owe $25,000 on the forgiven debt. Under current
law, if the correct paperwork is filed when they do their income taxes they
will owe nothing on that forgiven debt. If the law expires we are back to the
former homeowner owing income taxes on money they really never got. The same
goes for short sales.
Hopefully you can see why, if you
are contemplating a short sale that you act now. A typical short sale
can take 4-6 months to complete. Imagine if the Mortgage Relief Act is not
expended and you have to pay income taxes on the forgiven debt – how
catastrophic is that?
I don’t know about you but if I were
contemplating a short sale or facing foreclosure I sure would not
roll the dice on our Congress doing the right thing and extending the tax
relief. I would be short selling now.
To get a better idea of when your West
Sacramento home will be worth what you owe, log in to www.shortsaleandloanmod.info
for a free estimate or call me today for a free no obligation consultation or
for the latest West Sacramento short sale information. Call me
today and sleep better tonight; you’ll be glad you did
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