Senate Approves Fiscal Cliff and Includes Extension of the Mortgage Debt Tax Relief for Short Sales

Posted by on Jan 1, 2013 in Government Bills, Regulations and other news affecting, Short Sales Stop Foreclosure | 7 comments

Senate Approves Fiscal Cliff and Includes Extension of the Mortgage Debt Tax Relief for Short Sales

Early this New Years morning, the Senate approved the budget to “avoid” the fiscal cliff that would have lead Americans into a financial tizzy.

As long as the House votes this in, we’re all good. Meaning?

If you sell your home for less than what you owe, Short Sale, you were liable for the difference on what you owed and what was forgiven.

EX:  if your home is worth $200,000, but you owe $350,000, we would be taxed on the $150,000 that was essentially forgiven by your lender.

  • $150,000 x 15% Tax rate = $22,500 tax liability

Well, in 2007 President Bush made law, the Mortgage Forgiveness Debt Relief Act of 2007, essentially wiping out this liability for homeowners that successfully complete a Short Sale. It was scheduled to “sunset” or go away as of 12-31-2012…last night.

With the impending house approval of this avoidance of the “fiscal cliff”, we will realize the extension of the mortgage debt relief for homeowners completing a short sale before 2015.

Happy New Year!

By: Kris and Kim Darney

7 Comments

  1. Hi Kris and Kim,

    In your email Jan 1, 2013-Tax Relief Act Extended for 2 years but with CAR it’s only extended till December 31, 2013. Just want to verify.

    Thanks.

    Bernadette

    • Bernadette, CAR is correct. The Senate approved 2 years…the House agreed to 1 year.

      It’s a compromise.

      Best,

      Kris Darney

  2. So is there a similar forgiveness for California taxing?

    • Curtis,
      California has the same tax law.
      Best, Kris Darney

      • Great,

        I had understood the CA tax/debt forgiveness would have also expired 2012. This is good.

        Do you handle out of SOCAL short sales, as health may force moving to a assisted care facility. I certainly would want to get approved for the lease before I walk away w/short sale on a house worth 200K less than existing mortgage is for.

        • We handle Short Sales in the entire state of California. Please let us know if we can assist.

  3. Hello Kris and Kim I want to be certify for your program but my question is do I need to pay $ 99.00/Mo. or I have some other options please replay

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  1. Tax Relief Act Extended for 2 years in Fiscal Cliff Avoidance | Fresh Start Housing Program - [...] Along with Fresh Start, there was the Mortgage Forgiveness Tax Relief Act of 2007 that also helps the homeowner …

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