Could Short Sales End If Mortgage Forgiveness Debt Relief Act of 2007 Is Not Renewed?

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Many people make believe in superstitions like “Unlucky 13” which could be conveyed to the impending year 2013. Especially for those who own homes, 2013 could be considered unlucky or more at least unlucky for their bank accounts especially in the real estate world.

Firstly, unless things change the Mortgage Forgiveness Debt Relief Act of 2007 will expire at the end of 2012. That debt forgiveness remains a vital part of short sales and not renewing it could be devastating to the short sale market. If the government does not renew the Act then homeowners would be subject to paying the taxes on “phantom income.” People use the term phantom income to refer to debt forgiveness.

Secondly, we saw CNBC Wealth Editor Robert Frank say that anyone who owns an expensive mansion would probably be smart to sell right now because of the impending tax changes for 2013. We conferred with a Foster City based CPA who has a lot of knowledge about distressed properties as well as high end real estate. He told us that some of the misinformation about the effect on home sales of the tax changes in 2013.

First of all, if a homeowner meets the residency test this tax only applies
to the gain over $250,000 or $500,000 married filing joint. That eliminates
a lot of homeowners.

If someone’s gain exceeds this amount, then he will plan and
discuss options. If the homeowner still wants to sell the property.
The excess gain (over $250K or $500K) would be subject to the following
taxes:
1) Medicare of 3.4% (part of Obamacare)
2) A potentially higher capital gains rates. Maybe 20% but who knows.

Unless you own a $25 million dollar mansion, then it might not be too smart to get caught in the mansion panic and think that your home will fall of some “tax cliff”. Do some due diligence and get the necessary answers before making a move.

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

Mortgage Forgiveness Debt Relief Act of 2007

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2 Comments

Filed under California, Mortgages, short sales, Tax Credits

2 responses to “Could Short Sales End If Mortgage Forgiveness Debt Relief Act of 2007 Is Not Renewed?

  1. Pingback: Fast Help For Homeowners (FHFH) Act, H.R. 6153 Introduced To Speed Up Short Sales | Resource Blog

  2. Pingback: Will The Mortgage Debt Forgiveness Tax Break Be Extended? | Resource Blog

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