The Mortgage Forgiveness Debt Relief Act is set to expire December 31, 2012. Should this happen and the the government does not extend the act, short sale sellers will most likely be taxed on the forgiveness portion of the sale.
The way the forgiveness works is the house sells for $300,000 the mortgage is $400,000 the difference or forgiveness is $100,000. Most likely if this act is not extended short sale sellers will be taxed on the forgiveness portion. Most of the time the forgiveness $100,000 as in the above example is added to your personal income and taxed as income.
HARP refinances are loans that exist for people looking to refinance their underwater home, and reduce the interest rate. In order to obtain a HARP refinance your loan must be backed by Fannie Mae or Freddie Mac to qualify and have had no late payments in the last 6 months and been on time for 11 of the past 12 months. Your current lender can tell you if your loan is backed by either of these agencies.
Please always consult your tax professional before deciding to proceed with a short sale as a tax professional can provide you with more information based on your income and assets.
If you need to proceed with a short sale, I am here to help get your home sold and help save your credit.
Please feel free to give me a call!
562 243 2966
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