The Mortgage Debt Forgiveness Act Expires at the End of 2012

The Mortgage Debt Forgiveness Act Expires at the End of 2012

For those considering a Short Sale, you need to be aware that delaying getting your home on the market could result in some serious tax ramifications.

At the end of 2012, The Mortgage Debt Forgiveness Act will expire. This legislation, which Virginia has been following for state income tax purposes, gives an income tax pass to principal owners whose mortgages (used to purchase or improve the home were not paid in full through a Short Sale or Foreclosure, on that forgiven mortgage amount. Why does this matter?

Say you owe $500,000 on a home you sell in a Short Sale for $350,000. That leaves $150,000 to be forgiven by the Short Sale Bank. If forgiven, and the Seller of that home is in a 15% tax bracket, that could mean $22,500 in additional Federal income taxes.

Waiting to see what another year of real estate growth in Northern Virginia will bring to your value if you are considering a Short Sale could mean serious tax ramifications if the growth is not there to get you right side up in your mortgage.

Want to see if a Short Sale makes sense for you? Give me a call. I've been listing and selling Northern Virginia Short Sales since 2007. I can help you make sense of whether a Short Sale is a good choice for you. Certainly, timing is everything and right now, time is on your side. Wait too much longer into 2012 and you may not be so lucky.

Chris Ann Cleland, Associate Broker-Licensed in VA, Long & Foster REALTORS®

703-402-0037, ChrisAnn@LNF.com, www.SpeakingOfShortSales.com