Mortgage Forgiveness Tax Treatment Gets One More Year.

The advancing fiscal cliff debates were getting everyone’s concerns up, but for those of us who work in the real estate industry, we had specific issues that were of high notice.  The mortgage forgiveness tax treatment has been instrumental in assisting people who are in underwater mortgages to recover by using a short sale and has been beneficial to the housing recovery.

This from the Realtor Association of Pioneer Valley’s Ben Scranton:

“The law – which was set to expire at the end of 2012 – is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales. Normally, U.S. law decrees that when a lender forgives all or a portion of a borrower’s debt, the forgiven amount is considered taxable income for the borrower. This is known as Cancellation of Debt (COD) Income and must be included in a taxpayer’s gross income. This Act, however, created an exception to this rule under the U.S. Tax Code. The Mortgage Forgiveness Debt Relief Act allows homeowners who received principal reductions or other forms of debt forgiveness to not pay taxes on the amount forgiven. The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence. For homeowner’s to qualify, their debt must have been used to “buy, build, or substantially improve” their principal residence and be secured by that residence. The law, which was passed in 2007 with a 5 year sunset provision, will now be in effect until January 1, 2014.”

Good News for Short Sales in Western MA

For more information on this and other real estate related impacts from the fiscal cliff bill, see this brief from the National Association of Realtors:

If you are a homeowner in the Pioneer Valley of Western Massachusetts who thinks that a short sale might be the answer to your real estate troubles, please give me a call to schedule a consultation.  Lesley Lambert, short sale specialist at Park Square Realty 413-575-3611.

You can visit www.shortsaleyourho.me for more information to see if you might be able to avoid foreclosure on your Western MA home with a short sale.