On December 31st2012 the Mortgage Debt
Relief Act is set to expire – what does this mean for homeowners who are
struggling with their mortgage? Simply put, it could potentially mean more
debt.
The Mortgage Forgiveness Debt Relief Act
and Debt Cancellation was put into place in 2007 to help homeowners who owed
more on their home than what they could sell it for. For example, if you owed
$400,000 on your property and sold it for $300,000 at a 28% tax rate, the
settlement difference of $100,000 is $28,000 in taxes you could owe the IRS.
However, those who complete a short sale prior to December 31st 2012 would not
have to claim the $100,000 as taxable income.
Normally, the debt that is forgiven by
the lender would be included as income on your tax return and it is subject to
taxation. But the Mortgage Debt Relief Act allows you to exclude curtained
forgiven debt on your principal residence from your income. If Mortgage Debt
Relief Act is not extended, this exception will go away and struggling
homeowners could owe the IRS.
Short sales can take anywhere from one
month to several months to complete. The process can be arduous and stressful –
that is why it is imperative homeowners hire a professional, experienced
REALTOR to help them navigate through the process. If you think a short sale is
the best alternative for you right now, you need to act and quickly. It is
unclear whether or not Congress will agree to extend the Mortgage Debt Relief
Act past the end of the year. If you need to short sale your home, now is the
time. Please contact me today for a private, no obligation consultation to
review your short sale options.
Luisa Ramirez
RE/MAX Professionals
623-687-7827
RE/MAX Professionals
623-687-7827