The Tax Exemption that saved people on sometimes HUGE tax consequences due to a short sale or a foreclosure has expired.
What’s the effect of that?
It may (will?) affect any of us who work with short sales. The lack of this exemption could be the very thing that stops someone from going through with that short sale.
If the homeowner was going to have a $100,000. shortage due to a short sale, depending upon the tax bracket they are in, that would mean they would have to pay taxes on that $100,000. Someone in the 30% tax bracket would have a $30,000 tax bill due.
So we’re recommending that you and your clients – if you’re a realtor or anyone else involved with real estate and short sales, get involved and send a message to Congress. Find your Congress person and send them an email telling them to reinstate the Act and make it retroactive.
There is a bill, on the floor of the House, H.R. 2994, that would extend MDRA for two more years. It was stalled last year but has the best chance of making it through the process of becoming law. Track the law here: http://beta.congress.gov/bill/113th/house-bill/2994 and ask your elected officials to pass this law.
You can locate your local Congress person by going to http://www.house.gov/representatives/find/
Thanks to our friends at DIG!
PS Keep in mind that although the IRS formerly Forgave the Debt, Massachusetts (although a lower tax %) never forgave this debt.