There are a number of benefits and advantages to opting for a short sale over a foreclosure; one of those benefits is the fact that the federal government is currently allowing for a short sale tax benefit as part of the Mortgage Debt Forgiveness Act, which has just been extended for a period of two years. In short, this is very good news for homeowners.
President Barack Obama just recently penned his signature to a spending bill that served to extend those short sale tax benefits into 2017.
This current bill — part of the Mortgage Debt Forgiveness Act — provides a tax break to homeowners who went through a short sale in 2015.
Without the Mortgage Debt Forgiveness Act, any mortgage debt that was forgiven at the conclusion of the property’s short sale would count as income. As a result, this would increase the former homeowner’s tax liability. So, for instance, if a property owner owed a total of $500,000 but the home was only sold for $400,000 in a short sale, the lender had two options: they could pursue the borrower for the remaining $100,000 or they could forgive the debt. If the debt was forgiven, that $100,000 sum could potentially be counted as taxable income.
But the Mortgage Debt Forgiveness Act temporarily changes these rules, so any mortgage debt forgiveness is not counted as income. As a result, individuals can see hundreds or even thousands in tax savings, depending upon how much was forgiven on the loan.
In addition to covering short sales that occurred in 2015, this extension allows anyone who performs a short sale in 2016 to enjoy the same tax benefit. So this is yet another advantage of opting for a short sale in 2016.
If the Mortgage Debt Forgiveness Act extension had not been approved and signed, the benefits would have expired when the clock strikes midnight, marking the arrival of 2016.
There are a number of unique steps and processes involved when going through a short sale instead of a traditional real estate transaction. You’ll have lots of advantages in this regard when you work with a short sale expert like Kristine Zelazo, better known as The Short Sale Gal.
If you’re seeking to sell your home as-is to an investor or wish to pursue a short sale transaction for the sale of your property, turn to Kristine Zelazo, the Short Sale Gal!
To get started, simply complete the home pre-sale form to provide Kristine with additional information on the property in question. Questions? Call 800.664.0616, x802.