Last time we answered the question many current and prior homeowners face – that is, “How Soon Can I Buy a Home After a Short Sale.” Today we’ll cover some more common after effects of a short sale such as:“What are the tax consequences if I do a short sale – how does that piece work? Is it like forgiven debt? Do I receive a 1099?”
Much of this ties into the Mortgage Forgiveness Debt Relief Act an act that was passed years ago. This act allows homeowners who have lived in the home for at least two years (within the last five years) to short sale their home TAX FREE. Many times, a homeowner with a successful short sale might receive a 1099 form from their lender roughly for the difference between the amount of the mortgage owed and the final sales price (again roughly – contact us if you have questions). This appears to be phantom income that was never earned or received. However, the Mortgage Forgiveness Debt Relief Act allows you to pay zero taxes – again, so long as you have lived in the home for at least two years within the last five prior to your short sale.
Sounds good right? It is! However, all good things come to an end.
The Mortgage Forgiveness Debt Relief Act is set to December 31, 2012. SO…homeowners who have been “thinking” about doing a short sale need to Act Now or they may end up paying taxes on the 1099 they receive. Why? On average it takes a REALLY DYNAMIC San Diego Realtors Office (or other mid to large metro cities for that matter) a minimum of a few months to successfully complete your short sale – so if you are “considering” doing a short sale in the city you live in, contact us to chat about your specific situation and possibly get it fast-tracked.
Until next time nation…