Posted on: 30th Jun, 2008 12:56 pm
I own rental properties that I got behind on due to "not so good" tenants. I have the option to do a short sale with the lender or a deed-in-lieu? Can anyone tell me which would be better for me in regards to my credit, taxes etc. Thanks
Hi Ivonah,
Welcome to forums.
Short sale is a better option than deed-in-lieu as far as the credit effects are concerned. Know how short sale or dil can affect your credit .
To find out which is better tax-wise, you need to give me the name of your state so that I can give further suggestions.
Thanks
Welcome to forums.
Short sale is a better option than deed-in-lieu as far as the credit effects are concerned. Know how short sale or dil can affect your credit .
To find out which is better tax-wise, you need to give me the name of your state so that I can give further suggestions.
Thanks
I live in Iowa. If I go with a short sale, how will it affect my tax liability. I am aware of the tax reform act whereas the difference owing will be forgiven, but I don't know if it apply's to rental properties. Thanks
Welcome Lauren.
I felt you are the original poster. Did you somehow get logged out? If the debt is forgiven then you are not required to pay taxes on it as per the Mortgage Debt Forgiveness Act but in case of short sale the deference is not forgiven. So you will have to pay the deficiency judgment. Talk to your lender and get it clear whether or not you need to pay the deficiency judgment.
Let me know if you have any further queries.
I felt you are the original poster. Did you somehow get logged out? If the debt is forgiven then you are not required to pay taxes on it as per the Mortgage Debt Forgiveness Act but in case of short sale the deference is not forgiven. So you will have to pay the deficiency judgment. Talk to your lender and get it clear whether or not you need to pay the deficiency judgment.
Let me know if you have any further queries.
sorry the Mortgage Forgiveness Debt Relief Act of 2007 does not apply to rental properties. However, a short sale is the better option compared to deed in lieu because it does not have as big an affect on your credit score.
Hope this helps. :D
Hope this helps. :D
Someone said that if I can prove "Insolvency" the difference between what is being paid to the bank vs. what is actually owed could be forgiven in regards to the tax hit. Does anyone know anything about that? Thanks
I have not heard that but here is a link you can go to and read more about Mortgage Forgiveness Debt Relief Act of 2007.
http://www.irs.gov/irs/article/0,,id=179073,00.html
http://www.irs.gov/irs/article/0,,id=179073,00.html
... can be found at 26 U.S.C. 108(a)(1)(B). Please consult with a REAL CPA to handle your taxes for the year in which you do the short sale/DIL in order to maximize your protection. I promise you-- H&R Block won't be able to help you properly!!! :-)
who pay taxes in the difference in the value of the house
Welcome gilbert,
In case of a short sale or foreclosure, the deficient amount resulting from the sale of the property is required to be paid to the lender. If that amount is forgiven, then the borrower will have to pay taxes on the forgiven amount.
In case of a short sale or foreclosure, the deficient amount resulting from the sale of the property is required to be paid to the lender. If that amount is forgiven, then the borrower will have to pay taxes on the forgiven amount.