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Short Sale Homeowners Get a Tax Break in 2013

When Congress voted to avoid the “fiscal cliff” and extend the Bush Tax Cuts for 98% of Americans, they also included a provision that extends the Mortgage Forgiveness Debt Relief Act through 2013.

This is another tax break for homeowners who choose to take a Short sale approach and sell their home for less than they owe to the lender (with prior lender approval.) Without this extension, homeowners would have to add the difference between what they owe and what they sell their home for to their 2013 taxable income. That is a huge win for anyone choosing to do a Short Sale and getting out from under their mortgage.

Without the Mortgage Forgiveness Debt Relief Act extension, a homeowner who owes $150,000 on the mortgage and short sells the home with lender approval for $100,000, would have had to include the $50,000 difference as income in their income tax return for 2013.

Struggling homeowners who are considering a short sale or loan modification will continue to be eligible for this tax relief through Dec. 31 2013.


Sean Roque

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