You’ve read that correctly.  Time is running out to sell your home as a short sale – If you want to take advantage of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act.

As many Americans already know, Congress enacted a law to limit tax burden on homeowners who short sell their homes between January 1, 2007 and December 31, 2012.  Homeowners who sell their home as a short sale and their deficiency is forgiven, may be eligible to not have any tax burden if they meet certain criteria.  Click here for the IRS explanation of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act.

 

Here is the critical point to keep in mind – It takes time to market and sell a home, not to mention negotiate the short sale with the lender that holds the note.  December 31st, 2012 is the deadline to close a home.  That means that a seller would want to get their home on the market no later than June of 2012 if they wanted to feel confident that they would get the home closed by December 31st, 2012. Time is really running out.

In most instances, without the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, if a homeowner sold their home as a short sale and had a $100,000 deficiency, that deficiency would count towards their income on their taxes for that year.  For example, if you owed $300,000 on your home and sold it for $200,000, you would have a $100,000 deficiency.  $100,000 would be counted as income on your taxes.

If you are considering putting your home up for sale here in Arizona, or anywhere else in the country, now is the time to act!

 

We recommend consulting a real estate attorney and tax adviser regarding ramifications of completing a short sale on your home.