If you have been considering or are in the process of negotiating a short sale for your home, you’ll be excited to know that the Mortgage Forgiveness Debt Relief Act of 2007 was extended through the end of 2013.
The Mortgage Forgiveness Debt Relief Act extends mortgage cancellation tax relief for home owners and sellers through disallowing taxes on the portion of their mortgage debt forgiven by their lender (e.g., short sales, principal reductions, foreclosures).
As short sales have represented a large sector in the housing market of late, the extension is seen by many as key to a continued recovering housing market. According to the U.S. Foreclosure & Short Sales Report™ complied by RealtyTrac, the last quarter of 2012, showed short sales as representing 19 percent of residential home sales in the United States. See the full report by clicking here.
According to RealtyTrac Vice President Daren Blomquist, the increase in short sales and distressed properties showed that “both lenders and at-risk homeowners are realizing that short sales are often a better alternative than foreclosure.” Blomquist went on to explain that had the Mortgage Forgiveness Debt Relief Act expired, homeowners would have seen their income tax increase since the unpaid loan balance created by the short sale would have been considered taxable income for many home sellers.
With this recent extension, if you are a home owner interested in a short sale for your home, you now have until December 31, 2013 to benefit from the reduced taxes provided by Mortgage Forgiveness Debt Relief Act.