Short Sale Debt Relief Extended for 2013!
Section 202 of the just passed fiscal cliff bill is VERY good news for the housing market this morning…If you’re in the middle of a short sale or hoping to sell soon because you’re underwater, rest easy…sellers who now complete their short sale in 2013 will NOT face a massive tax bill after the sale!
As part of the fiscal cliff deal, the Mortgage Debt Forgiveness Act of 2007 has been extended for one more year. Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would be considered income for tax purposes. As an example, if you owe $250,000 on your mortgage and your bank agrees to a $200,000 short sale, your $50,000 in debt is forgiven by the IRS. Without last night’s extension of this law, you would be paying taxes on that $50,000 the next year. Here is the actual language from Sect 202 of the bill:
SEC. 202. EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS. IN GENERAL.—Subparagraph (E) of section 108(a)(1) is amended by striking ‘‘January 1, 2013’’ and inserting ‘‘January 1, 2014’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to indebtedness discharged after December 31, 2012.
This is an exciting update for our current and future clients. If you have any questions about the process, please feel free to give me a call at 703-400-6757 or email jennifer@jyhteam.com.
As part of the fiscal cliff deal, the Mortgage Debt Forgiveness Act of 2007 has been extended for one more year. Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would be considered income for tax purposes. As an example, if you owe $250,000 on your mortgage and your bank agrees to a $200,000 short sale, your $50,000 in debt is forgiven by the IRS. Without last night’s extension of this law, you would be paying taxes on that $50,000 the next year. Here is the actual language from Sect 202 of the bill:
SEC. 202. EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS. IN GENERAL.—Subparagraph (E) of section 108(a)(1) is amended by striking ‘‘January 1, 2013’’ and inserting ‘‘January 1, 2014’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to indebtedness discharged after December 31, 2012.
This is an exciting update for our current and future clients. If you have any questions about the process, please feel free to give me a call at 703-400-6757 or email jennifer@jyhteam.com.
