Real Estate Blog

SHORT SALES

March 14th, 2008 9:45 PM by Sherry Lee

For those considering a short sale on their property, legislation was recently passed called "The Mortgage Forgiveness Debt Relief Act of 2007" and was signed into law by President Bush in December 2007. Also known as the DRA, the IRS has now printed revised forms for taxpayers to use to claim the new tax break. The main part of the revision involves debt cancelation income.  Before last year, if you sold your home for less than what was owed, and the bank agreed to cancel any part of your debt, you would have had to pay taxes on the amount of debt that was forgiven.  So, if you conducted a short sale on a home and owed $200,000, but sold it for $170,000, and the bank agreed to cancel the $30,000 difference, the IRS would have levied a tax against the $30,000. For someone in the 28% tax bracket, this would have meant an $8400 tax bill owed to the IRS.  Now, using the new legislation, sellers can get a break at a time they need it most.    
Posted in:General
Posted by Sherry Lee on March 14th, 2008 9:45 PM

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