Short Sale My Home - Without Paying Taxes
The home short sale has long been regarded as a lifeline for borrowers facing foreclosure. One of the main consequences of short sale is tax. When your debt is cancelled by bank the government takes it to mean that you earned money from the short sale process. The IRS records the amount forgiven on a short sale as part of the sellerís income. But it can be avoided. This article presents a quick guide to deal with short sale home taxes.
which may be charged to the seller the year of the short sale. Hereís a quick guide to home short sale taxes and how you can deal with them.
Why Are Short Sales Taxed?
The IRS records the amount forgiven on a short sale as part of the sellerís income. When a bank cancels part of your debt, the government takes it to mean that you earned money from the short sale process, even if you didnít pocket anything. Your bank usually sends you a 1099 form come tax season, which will tell you how much ďincomeĒ was gained in the home short sale and how
much you will have to pay.
Can Taxes Be Avoided?
The Mortgage Debt Relief Forgiveness Act of 2007 exempts home short sale sellers from tax consequences. It applies to residential homes sold in a short sale process from 2007 to 2012 and is good for debts of up to $2 million. If youíre part of a married couple and you plan to file separately, you will be exempted for up to $1 million each.
What If I Donít Qualify?
The most common way to avoid taxes during the short sale process is to negotiate it with your lender. You can get your bank to waive the debt cancellation and not send you a tax form. In exchange, however, you give them the right to go after you for the debt you still owe, since it was no longer cancelled. Depending on state law, lenders may be allowed to seek deficiency judgments, meaning the court will order you to pay the difference.
What If The Bank Claims The Deficiency?
The deficiency claim covers the difference between your remaining balance and the home short sale selling price. When you ask them to waive the income, they are free to sue you or ask to claim any of your assets to pay the difference. Most sellers choose to pay the tax instead because a deficiency claim reflects badly on their credit report, on top of the score drop already caused by the home short sale.
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ABOUT THE AUTHOR
Jacob Bon comes from a background in short sale sales. Marketing and sales have always been in the forefront of Bon's business activities. He strives to make every encounter a positive experience and seeks to do the best for his clients. The skills possessed by him have helped the number of people to avoid foreclosure. To read more about how short sale seller can except from short sale taxes visit:- http://www.shortsaletax.org/