This message is from Laurus Title
It's only June, but it is an election year. There are a number of issues outstanding that will require some input from you, the voters. NOW is the time to start being more politically active if you want to achieve your goals in the future.
The Mortgage Debt Relief Act of 2007 is set to expire at the end of the year. To help assure that it is extended and homeowners get continued relief from the burden of taxes on the forgiven debt amount, reach out to your representatives and let them know that it is important that this vital act be extended.
Send a letter, email, telegram or call their local offices and let them know that the extension of The Mortgage Debt Relief Act of 2007 is important to you and to them, if they are seeking reelection!
Be involved!
Bob
Short Sale Tax Savings
An increasing number of homeowners who are underwater on their mortgage are selling their homes by short sale, and that could become an even more popular option during the rest of the year.
That's partly because of a law set to expire at the end of 2012
that offers tax relief for homeowners who sold their home in a
short sale or have had some other sort of mortgage debt forgiven
or canceled, such as in a foreclosure or modification that
included principal reduction.
While there are efforts in Washington to extend these tax benefits,
it's hard to guess whether they'll be renewed. The current savings for
taxpayers is significant.
Say a homeowner took out a $200,000 mortgage on a
home, and subsequently became underwater by about 20%, or
$40,000, during the housing downturn. Without the current tax
law, if the bank forgives that amount the borrower is
underwater, such as through a short sale, they'd be subject to
pay taxes on that forgiven amount, since the Internal Revenue
Service regards it as income. So for someone in the 25% tax
bracket, forgiveness of $40,000 would mean a $10,000 tax bill at
the end of the year, says Mark Luscombe, principal federal tax
analyst for CCH, a Wolters Kluwer business and a provider of
tax, accounting and audit information, software and services.
To help taxpayers during the housing bust, Congress passed the
Mortgage Debt Relief Act of 2007, removing that tax burden. For
taxpayers, up to $2 million of forgiven debt (or $1 million for
those married filing separately) is eligible for the exclusion,
according to IRS.gov.
The law has been renewed once already, Trade groups such as the
National Association of Realtors are currently lobbying for the relief
to be extended once more. But eventually this law is expected to expire.
It's just a matter of when: "This one is probably going to sunset at
some point. It's a question of whether Congress thinks this is
the right time or not," Luscombe said.
It's also worth pointing out that taxpayers in so-called "non-recourse"
states may be protected from having to pay these taxes even when the law
expires, he pointed out.
Homeowners would be best served by seeking out the advice of a tax specialist
for help in their local area.
