I closed a short sale last week. It’s been a while since I’ve been able to (had to?) say that. There was a time when we were up to our eyeballs in short sales but thankfully they’ve become fewer and further between these days. In Phoenix right now short sales account for less than 5% of the market inventory, and foreclosures are a staggering less than 2%. We’ve come a long way, Baby!
Short Sale News – Forgiveness Extended
For our recent seller, a short sale was the best option. And for her, and others like her, the December extension of the Mortgage Forgiveness Debt Relief Act through December 31, 2016 is a great thing.
What is the Mortgage Forgiveness Debt Relief Act, you ask? Per the IRS:
Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20 (& extended through 2016), taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return.
The debt must have been used to buy, build or substantially improve the taxpayer’s principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available.
It should also be noted that this RETROACTIVELY includes 2015 which was kind-of left out there hanging for the year. If you’ve had debt forgiveness in 2015 or 2016 make sure you talk to your tax professional.
Do you know anyone having a hard time making their payments? Upside-down in their home? There are options and there is hope. Email [email protected] or call 480.560.7255 for your confidential conversation.