The Mortgage Forgiveness Debt Relief Act Has Been Extended Through January 2014!
Great news for sellers who need to short sale a home and for everyone in general as this should help keep our housing market moving forward in the coming year.
Normally forgiven debts such as those that occur in a short sale where the bank agrees to accept less than a full payoff, would constitute income in the IRS tax code, however the Mortgage forgiveness debt relief act and debt cancellation act of 2007 allows this to be a non-taxable event on a homeowners primary residence. Previously homeowners who short sold or suffered a foreclosure were given a 1099 for taxable income on these transactions.
Short sales minimize the loss to the bank, the home buyer gets disclosures and more knowledge of the home, the home seller is able to leave the home with dignity knowing that it will be cared for by the next owner.
Many banks are offering seller incentives to short sale such as relocation funds to help ease the transition plus most sellers can purchase another home is 18 months to 2 years – a win, win for all.
For more information on the Mortgage Forgiveness Debt Act see the link below.