Good news! There was a lot of worry in the last few months of 2012 by homeowners contemplating a short sale, because the Mortgage Forgiveness Debt Relief Act (MFDRA) was due to expire on December 31, 2012.
Homeowners who undertake a short sale generally have tens or even hundreds of thousands of mortgage debt forgiven by their lender. While having debt forgiven is a good thing, in some cases that forgiven debt may be taxable as income.
The MFDRA was enacted in 2007 because so many American homeowners were affected by the financial crisis, and were trying to deal with their financial losses through loan modifications or short sales. Most homeowners who are trying to sort out their finances by undertaking a short sale do not have the funds to then pay thousands of dollars of income tax on money that they never actually received. The MFDRA relieves them of that obligation: their forgiven debt is tax-free.
The MFDRA was due to expire at the end of 2012. However, the American Taxpayer Relief Act of 2012, passed by Congres on January 1, extends that deadline for a full year. This means that the MFDRA now applies to any mortgage debt that was forgiven between January 1, 2007, and December 31, 2013.
You can read in more detail about what the act actually does here: Mortgage Forgiveness Debt Relief Act of 2007
Seattle Short Sales has the most experienced and most successful real estate short sale specialists working with us. We close, on average, 15% of all short sales per month in King County. In the last 24 months, we have negotiated over 650 short sale approvals, and discounted over $65 million of mortgage debt for distressed homeowners.
A short sale can improve your credit, and help you to avoid foreclosure and get a fresh start. As part of our service, we offer unlimited attorney and CPA consultations.
If you are a homeowner, and would like to learn more about short selling your home, please go to: http://seattleshortsales.com/homeowners/
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