Short Sale exeption ends Dec 31st 2012

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.






  • September 19 2012 - Spring Hill
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (3)

Profile picture for Ofe Polack
This is election year, so anything can happen!
  • September 19 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
No word from Congress about whether or not the law will be extended, but I would not count on it election year or not. The LA Times recently featured an article about mortgage debt tax forgiveness ending. 
  • September 19 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

FYI...if one is insolvent at the completion of short sale,  taxes on debt forgiven becomes a non issue

Definition of insolvent:  Insufficient to meet all debts
  • October 11 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.