The Mortgage Forgiveness Debt Relief Act of 2007 has lessened an important concern for foreclosed homeowners, taxes. This has been a worry when a lender decides to "forgive" some of the debt.
by: RobKosberg |
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You may know this debt "forgiveness" as a "short sale." This occurs when a homeowner can sell only for a price lower than the debt balance and the lender accepts the lower amount as the mortgage balance.
This is often called a "short sale" because the lender is "short" of the full amount owed.Prior to Thursday, the IRS treated the forgiven mortgage debt as taxable income. This added thousands of dollars to a foreclosed homeowner's tax liability.
A $50,000 short sale, for example, could yield an additional $12,500 in taxes owed.After the bill's passage, that tax liability is gone. No taxes will be owed on primary residence mortgage debt that is forgiven or written off by a mortgage lender.
On the other hand, there may be $650 million dollars lost to the IRS. The bill does limit tax breaks for selling vacation and/or second homes. These limits will affect homeowners.
Be sure to arrange to speak to your financial advisor if you believe that the Mortgage Forgiveness Debt Relief Act of 2007 will affect you.
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About the Author
If you are in the early stages to Buy a Home then check out Rob Kosbergs' Detailed FREE Guide on Buying your Dream Home with a No Money Down Mortgage or for up to date Mortgage info visit my Mortgage Blog
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