With only days to spare before the end of the year, President Obama signed a bill extending the Mortgage Debt Forgiveness Act through 2014. The extension is great news to any individuals who completed a short sale in 2014.
A short sale is the sale of property for an amount that is less than what is owed to the bank. Traditionally, the short sale is accompanied with a waiver of deficiency, or the remaining debt. The problem is, however, the IRS treats any forgiven debt as taxable income. Accordingly, many underwater homeowners find themselves on the hook for large tax bills when debt is forgiven through a short sale. However, the Mortgage Debt Forgiveness Act exempts forgiven debt from taxation, and thus results in a huge savings for affected individuals. That law initially expired at the end of 2012, but was subsequently extended through 2013 and 2014 on a year basis. Whether the law will again be extended through 2015 remains to be seen.
Short sales are a great option for homeowners who are underwater on a home and need to sell. Sometimes, increasing interest rates, divorce, or job relocation require the transfer of the property. If so, a short sale is a good alternative for those who are either ineligible to declare bankruptcy or simply prefer to avoid the credit impacts of a foreclosure or bankruptcy.
If you are considering a short sale, call the Tampa short sale attorneys are DeWitt Law Firm today to discuss your options.