Short Sale Now While Tax Forgiveness Still In Effect

The Mortgage Forgiveness Debt Relief Act of 2007 has been extended until the end of 2013, but it's fate in future years is unknown. This law that applies to primary residences is a tremendous asset for homeowners who complete a short sale, which is a transaction that can occur when your mortgage balance is higher than the market value of your home.  The lender can agree to accept the market value as payoff for the loan. However, this difference between the lender's sale proceeds and the loan balance was taxed as income prior to 2007 and may be taxed again starting in 2014. Vacation homes and investment properties that are sold as a short sales are currently subject to federal income tax on the forgiven loan amount.

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