Real Estate News: Mark Your 2013 Calendar: The Mortgage Forgiveness Debt Relief Act 2007 May Help You

Mark Your 2013 Calendar: The Mortgage Forgiveness Debt Relief Act 2007 May Help You

Market Action Index demonstrates the measurement of current
rate of sale vs. inventory of homes available in market.
The index for zip code 89178
is a 30 and the score implies seller's market conditions for July 2013.

Real Estate 2007-2012: Short Sales in Southern Nevada

Homes sold as “short sales” have increased since 2007. In Las Vegas, Nevada over the last few years, short sales were reported as between 20 % and 25 % of home sales. By June 2012, short sales increased to 32 %. By December 2012, short sales or lender-approved sales for less than the principal mortgage balance accounted for a record 45.8 of sales. A short sale occurs when a bank agrees to sell a home for less than what is owed on the current mortgage. An option for homeowners who want to get out of an "underwater" situation on their current home is to sell the property as a short sale.

Get the Facts: The Mortgage Debt Forgiveness Relief Act 2007

A concern for homeowners, selling their homes as a short sale property, has been the need to report the difference of the sale as income on filed tax returns. Fortunately, The Mortgage Debt Forgiveness Relief Act 2007 allows homeowners, who opt for a short sale, to be exempt from taxes on the difference between the purchase price and amount owned. Normally, debt forgiveness results in taxable income. However, the stipulations of the Mortgage Forgiveness Debt Relief Act of 2007 grant eligibility to the homeowner to exclude up to $2 million of debt forgiven on the principal residence and limit of $1 million for a married person filing a separate return (IRS 10 facts about Mortgage Debt Forgiveness).

Act Now: Mortgage Debt Forgiveness Relief Act 2007

Let's look at a scenario you can relate to in your life.You earn $50,000 per year and purchased a house for $250,000 and you decided to sell the property as a short sale. Your property sold for $200,000 and the bank forgave you $50,000 of debt ($250,000 - $200,000 = $50,000). Without The Mortgage Debt Forgiveness Act 2007, you would be required to report the $50,000 as part of your income. Your taxable income for the year would be double from $50,000 to $100,000! The Mortgage Debt Forgiveness Relief Act expires at the end of 2013. Originally, the act was enacted from 2007-2012. The extension was given at the end of 2012. If you sell a home as a short sale, you need to ensure the home closes before the end of the year in order to receive the benefits of The Mortgage Debt Forgiveness Act 2007.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit the IRS Web site at IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading from IRS.gov or by calling 800-TAX-FORM (800-829-3676).