Is Tax Relief Coming to an End?
The Mortgage Forgiveness Debt Relief Act (MFDRA) is set to expire January 1, 2014. This is troubling news to anyone hoping to short sell their home. Under the current terms the debt that is forgiven isn’t taxed. However normal IRS rules require that the home owner who received the benefit of forgiven debt pay taxes as if it were income. That tax can be as high as 23%.
Let’s say you owe $500,000 on a home you bought in 2007 and today you short sell it for $300,000. that’s a forgiveness of $200,000 and could result in a tax bill from the IRS for $46,667.00. That would be devastating for a family in an already terrible situation. This is a scenario that could play out around the country if the Mortgage Forgiveness Debt Relief Act isn’t extended.
Are you trying to short sell your home in South Carolina? Let us know how you feel about this bill and if it should be extended.