Good news out of the "Fiscal Cliff" package approval today. Congress passed the package which included language to extend the so called, short sale tax relief. This is good news for homeowners facing a short sale, foreclosure or even a loan modification in 2013. This means that when a homeowner sells their home, the IRS won't treat the debt forgiven by the bank as income, which means they won't owe taxes on that amount. This provision enacted originally in 2007 was set to expire at the end of 2012.
Every homeowner thinking of doing a short sale, a loan modification or even facing foreclosure when all else fails, should always consult with a professional tax expert, CPA or attorney to discuss their individual circumstance. The last thing you want to deal with is a big tax bill when selling your home short or accepting a principal reduction which may result in the bank "forgiving" the amount they are writing off.
Keep in mind, that at present, this extension only impacts the IRS/Federal tax relief and NOT the State of California - yet. We are hopefully the state will follow suit as they did in 2010 when they extended their debt relief provisions at that time.
Short sales are going to continue to be a big part of the local real estate market in 2013 as more and more banks seek other solutions to a foreclosure for their borrowers. If you're thinking of doing a short sale, looking at relocating, or experiencing a hardship - call me for a free, confidential consultation.
Click to find more information about the Mortgage Forgiveness Debt Relief Extension for 2013 including links to the fiscal cliff package, the IRS debt relief guidelines and the state website to monitor for more information.
Prudential California Realty
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Resident of Concord and Clayton since 1995.