The federal government extended the Mortgage Forgiveness Relief Act of 2007 to Dec. 31, 2016.
What that means to you as an primary residence homeowner doing a short sale is:
- No income tax consequence!
Yes it is true. In most cases a short sale will cost you $0. Most banks waive the deficiency (the difference between what you owe on your mortgage and what the house sells for). The waived deficiency triggers a 1099. The Mortgage Debt Relief Act extension considers that 1099 moot. Thus, you have no tax consequence from the short sale.
All traditional closing costs are covered in a short sale including: Realtor commission, short sale negotiator fees, attorney and title company closing costs, back real estate taxes, etc.
Typically a homeowner pays $0 when their house sells short, gets out of their deficiency, and for 2016 will have $0 tax consequence.
Is your house underwater? 2016 is the year to short sale!Have Us Help With Your Short Sale