New Foreclosure law that goes into affect 2013

 

I have done some extensive research on the new law for 2013. Here is what I have blogged and the IRS link below.

 

You may owe federal income taxes in 2013 if you have a short sale and foreclosure. Now is the time to make the hard decision. Are you going to walk away from your underwater home? Uncle Sam is still giving homeowners until Dec 31 2012 to go through a short sale or foreclosure. But effective Jan 1 2013 the rules change, the amount a lender forgives, either in a short sale or foreclosure on a primary residence will be taxable on federal income taxes.

So if a house sold $50,000 short of what is owed on the mortgage, then the selling homeowners will owe federal income taxes on that $50,000. Homeowners would owe $12,500 if they are in the 25% bracket and $7500 if in the 15% tax section. Homeowners would be on the hook even if the house sold but the bank had not formally forgiven the loan in a letter. The banks must officially sign off in writing before Dec 31 2012 otherwise you will be paying a huge tax to IRS.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence per IRS guidelines. Debt reduced through mortgage restructuring as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. Up to $2million of forgiven debt can be forgiven this year, $1million if married and filing separaely per IRS.

Homeowners declaring bankruptcy could escape paying income taxes on any cancellation of debt income if the debt is forgiven in the bankruptcy even if the debtor is solvent, said Nick Jovanivuch, a board certified tax atty in Florida.

Bankruptcy trumps everything, he said. Or homeowners might not have to pay income taxes on any cancellation of debt income by Donna White of Sacramento Bee

Here's the link for IRS

http://www.irs.gov/individuals/artic...179414,00.html

 

If you or someone you know is still waiting to make the decision to short sale, NOW is the time as it can take all of 6 months to close. To benefit from the full debt forgiveness, qualify for the cancellation of debt this is the year. Please call, text or PM me and we can meet and walk through the process and what to expect. The 2013 law does not favor the homeowner -

 

As far as extending it again? There has been much talk however no decision yet has been made. In fact, the Government has leaned more towards not extending the Debt Relief Act. Due to the new law going into effect in 2013 I highly doubt it will be extended.