The Mortgage Forgiveness Debt Relief Act relieves individuals from paying income tax on debts forgiven such as a mortgage, credit cards or any other loan. In the past, if you were forgiven a debt by any company, whether it was a credit card company, mortgage company or any other loan company, then the amount you owed that was forgiven would be considered taxable as income by the IRS. This means that if you short sold your home for $100,000 and you still owed $200,000 then the amount that was forgiven by your mortgage company would be taxable by the IRS.
Imagine being taxed for an extra $100,000 just because you did a short sale...
However, under the Mortgage Forgiveness Debt Relief Act of 2007, any homeowners whose debt was canceled whether in short sale or by other means would be avoiding tax liability. This Act was extended through 2012... This means this is the last year for you to short sale your home and avoid tax liability.
This of course only applies to your PRIMARY RESIDENCE. This means the home that you actually live in. You cannot short sale a commercial property or your ski condo in Aspen. If you are a Nevada resident and would like more information on Short Selling your home this year, feel free to contact our Law offices to talk to our team of professional attorneys today.