Post by Forever Sunshine on Sept 18, 2012 11:18:09 GMT -5
The law that exempts some forgiven mortgage debt from federal taxes expires Dec. 31. Unless Congress extends it, homeowners who do short sales or get principal reductions will get big tax bills.
As more underwater homeowners pursue short sales and principal reductions, they may not realize they are facing a deadline.
If debt you owe on your primary home is forgiven by Dec. 31, you will not have to pay federal income tax on that forgiven debt, as long as it was used to "buy, build or substantially improve your principal residence."
But if that debt is forgiven after 2012, borrowers will once again owe income tax on that amount. If you do a short sale and your lender writes off $100,000 of what you owed, that could mean a hefty tax bill. The same goes for foreclosure, in some states, or principal reductions that are part of mortgage modifications.
realestate.msn.com/blogs/listed-loans.aspx?post=872a9573-bba8-4af8-8b2e-1efaa1ec82de
As more underwater homeowners pursue short sales and principal reductions, they may not realize they are facing a deadline.
If debt you owe on your primary home is forgiven by Dec. 31, you will not have to pay federal income tax on that forgiven debt, as long as it was used to "buy, build or substantially improve your principal residence."
But if that debt is forgiven after 2012, borrowers will once again owe income tax on that amount. If you do a short sale and your lender writes off $100,000 of what you owed, that could mean a hefty tax bill. The same goes for foreclosure, in some states, or principal reductions that are part of mortgage modifications.
realestate.msn.com/blogs/listed-loans.aspx?post=872a9573-bba8-4af8-8b2e-1efaa1ec82de
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