Short sale tax break signed into law
No wonder our legislators and President are suffering such low approval ratings right now – with just 2 days to spare, they have finally re-enacted the Mortgage Debt Forgiveness Relief provisions which keep Short Selling home occupants from facing stiff taxes on phantom income. Unfortunately, 2015 is upon us and once again the collection of phantom income is a real specter hanging over short sales for next year.
Under the Mortgage Debt Forgiveness Act, any mortgage forgiveness achieved in a short sale is not counted as income for homeowners whom banks allowed to sell their homes for less than the amount of their mortgage.
The extension only applies to short sales conducted in 2014. Any further extension of the short sale tax break would need to be taken into consideration by the newly elected members of Congress when the Congress begins its 2015 session in January.
“Realtors strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed,” Polychron added.