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