After providing more than one billion dollars in tax savings to underwater homeowners, one of the best relief options for those facing foreclosure has been allowed to expire.
The Mortgage Forgiveness Debt Relief Act of 2007 was originally passed to aid the millions of homeowners who suddenly found themselves in danger of losing their homes to foreclosure following the housing market crash.
Under this legislation, any debt forgiven in a short sale, foreclosure, or loan modification, was exempt from federal taxes. With its expiration, however, a homeowner will once again have to report any forgiven mortgage debt as income.
For example, if a $150,000 mortgage loan receives a principle reduction of $25,000, the $25,000 must be reported as income. Similarly, if a house with the same mortgage goes through foreclosure, any amount of the $150,000 remaining after the house is sold at auction is taxable as well.
This tax burden can potentially add up to tens of thousands of dollars out of a distressed homeowner’s nearly-empty pockets. That’s why it’s now more important than ever to avoid foreclosure and the huge tax liability that comes with cancelled or forgiven mortgage debt.
As a Certified Distressed Property Expert (CDPE) agent, I can help. Contact me now to learn how you can save thousand in taxes and completely eliminate the threat of foreclosure.