On January 1, 2013, Congress passed an extension of the Mortgage Forgiveness Debt Relief Act. This extension of this act, which has saved homeowners more than $1 billion dollars in taxes, is great news for struggling homeowners nationwide.
The Mortgage Forgiveness Debt Relief Act was originally passed in 2007 to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.
Under the Mortgage Forgiveness Debt Relief Act, any debt forgiven in a short sale, foreclosure, or loan modification, is exempt from federal taxes on primary residences. For homeowners facing foreclosure, this exemption saves them from paying thousands, or even tens of thousands, in taxes on top of losing their homes. Typically, in a short sale, the difference of your sale can be taxed by the IRS as income earned for the year in which your home was sold. However, under the Debt Relief Act, if you file single, you are covered up to $250,000 of the difference in the sale of your home. If you file married, you are covered up to $500,000.
Now for another year, homeowners can take advantage of this exemption and avoid foreclosure without the fear of an impossible tax liability.
As a Certified Distressed Property Expert (CDPE) agent, I am specially trained to help homeowners escape the threat of foreclosure. If you or someone you know is facing foreclosure, contact me for a private consultation. I can help find a solution.