Tax Relief for Short Sales and Foreclosures Extended

As 2012 drew to a close, many struggling homeowners throughout Lafayette, CA and other communities in the country were scrambling to process their short sale or foreclosure. The tax relief provided for short sale and foreclosure properties was set to expire with the turn of the new year. When Congress came to a deal regarding the fiscal cliff, many property owners drew a sigh of relief. That tax relief was extended for another year, giving them more time to work through their challenges.

Under the now-extended law, homeowners who are struggling and need to sell their homes as short sales or foreclosures do not have to pay federal income tax on the debt forgiven by their lenders. Before the Mortgage Forgiveness Debt Relief Act was passed in 2007, that debt relief ended up being taxed as income. Had the act not been extended, homeowners would once again find themselves paying tax on that debt, which would have stopped the rise in short sales. Congress acted to prevent this, as these properties have been key in reviving the real estate market.

Whether you are interested in starting the short sale process or simply have questions about the real estate market, Cary Amo, your Lafayette, CA Realtor, is here to help. Contact him today for more information on tax laws.

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