GREAT NEWS! Mortgage Debt Forgiveness Act Becomes Law Again for Tax Year 2014
Posted by Bob Barnum on Tuesday, December 23, 2014 at 9:20 AM By Bob Barnum / December 23, 2014 Comment
In 2014, approximately 7% of the home sales in Hampton Roads were defined as a "Short Sale." A Short Sale is a type of distressed home sale in which the lender allows the seller to sell for less than what is owed on the mortgage. It is often used as an alternative to foreclosure.
Without the Tax Debt Forgiveness Act, the IRS had the ability to treat the "forgiven" shortfall as income. An example would be if a home sold for $300,000 and the mortgage owed was $350,000 then $50,000 of debt would be forgiven by the bank. (Not all short sales are without penalty. Some lenders still require a deficiency judgement and the debt could be re-payed over time). The $50,000 debt could be taxed as much as $14,000 for a person in a 28% tax bracket.
As a result of the Act being signed into Law this past Friday, all of the homeowners that sold property as a short sale this past year will now avoid the IRS taxes on the debt that may have been forgiven by their Mortgage Lender.
We are feeling desperate, how do we sell our home and move on with our lives?
Considering a short sale can be a stressful and complex process. There are legal, credit and tax issues that must be considered before deciding to go with this option. If you, or someone you know, is in need of a compassionate and confidential evaluation to review your options, then we are here to help. This service is provided with no charge or obligation on your part.
We will begin with a through valuation of the property and other factors that may impact your decisions before you proceed. We do not fake our way through the process. We rely on a team of specialized attorneys, tax consultants and mortgage consultants to provide a full and clear picture of your options completely without charge and totally confidential. Every effort is made to limit stress, liability and preserve you credit rating allowing you to move on with life.
Our mission is to serve and protect our client's interests. Contact us if you have questions about your home.
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