These homeowners are motivated to sell in a short sale because the closing price is less than what they owe the bank. The bank agrees to absorb the loss, and unloads the property while the homeowner gets out of a mortgage they can't afford.
Currently, homeowners don't have to pay federal tax on the unpaid mortgage debt because of a bailout-era law known as the Federal Mortgage Debt Forgiveness Act.
However, this act expires on December 31 and unless it is extended, in January the IRS will start treating unpaid mortgage debt as taxable income for many borrowers. The average amount of forgiven debt in a short sale is about $95,000, according to Blomquist. The tax on that amount could go as high as $33,250, even more if the Bush tax cuts expire.
No comments:
Post a Comment