Posted on: 22nd Jan, 2010 05:11 am
Hi,
I am currently two months behind on my mortgage and am working on getting Chase to allow me to short sale. Is the law still in effect that forgives the tax on the difference if you short sell? Also, if I am not able to get the house sold and it is foreclosed on, are there tax implications there as well?
I am currently two months behind on my mortgage and am working on getting Chase to allow me to short sale. Is the law still in effect that forgives the tax on the difference if you short sell? Also, if I am not able to get the house sold and it is foreclosed on, are there tax implications there as well?
Hi rocky,
The Mortgage Forgiveness Debt Relief Act is still in effect and it is applicable for debts discharged in the years 2007 through 2012. Thus, if there is a deficiency from the short sale of your property and it is forgiven by the lender, you can claim tax exemption on this forgiven debt amount. However, to qualify for the debt relief act, you must have used the property as your principal residence. In case, you cannot short sell the property and it goes into foreclosure, you can still claim tax exemption on the forgiven debt under the Mortgage Forgiven Debt Relief Act.
The Mortgage Forgiveness Debt Relief Act is still in effect and it is applicable for debts discharged in the years 2007 through 2012. Thus, if there is a deficiency from the short sale of your property and it is forgiven by the lender, you can claim tax exemption on this forgiven debt amount. However, to qualify for the debt relief act, you must have used the property as your principal residence. In case, you cannot short sell the property and it goes into foreclosure, you can still claim tax exemption on the forgiven debt under the Mortgage Forgiven Debt Relief Act.
In case of a short sale, the deficient amount is not forgiven by the lender. He will want you to pay off the dues. However, if he forgives the deficient amount, then depending upon your state laws, you won't have to pay the taxes.