End of year deadline? Why it's important to start now.

About this time last year, we talked about the looming expiration of the Mortgage Debt Forgiveness Act of 2007.  Under the 2007 law, homeowners do not have to pay federal income taxes on mortgage debt forgiven by lenders on short sales, foreclosures or loan modifications.

Such debt relief was previously taxed as income. But if the Mortgage Forgiveness Debt Relief Act had expired (without extension as we say in December 2012), homeowners would again be paying taxes on the amount written off after a short sale or on the reduced principal of a loan.

As part of the fiscal cliff deal, the Mortgage Debt Forgiveness Act of 2007 had been extended for one more year. Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would count as income for tax purposes. For instance, if somebody owes $250,000 on their mortgage and their lenders agrees to a $200,000 short sale, $50,000 in debt is forgiven. This would have been taxable without an extension of the law.

Once again we face the same possibility that Congress will NOT again grant an extension.  Talk to 20 different people about this and you will get 20 different answers.  But here is the best answer:  if you need or want to short-sale your home, we need to start TODAY to close escrow on or before December 31^st and start the new year right. 

Could they extend it?  Yes.  Does anyone know for sure?  No.  But let’s assume you are unable to afford your mortgage payments and need to negotiate a short-sale with your lender.  We need to start today and get it sold by the end of the year. As if you need more stress to worry if when you do sell in 2014 that you might owe the IRS!?  No thanks!

You can enjoy the new year in a cute rental home and in three short years you can qualify for a home loan again.  Start new in 2014, be happy.

Call today. 775-220-6330.