SHORT SALES IN 2017 And Changes In The Law

Dated: 03/31/2017

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As of January, 1 2017, you could be looking at a tax implications for forgiven debt. The Mortgage Forgiveness Debt Relief Act of 2007 and its extensions, exempted that income through 2016 from taxation (up to $2 million). Going forward, if you sold your home in a short sale, and the lender forgives the balance of your mortgage, the IRS may consider it taxable income. The only exemption is if your home had a written purchase agreement before the new year.

Sometimes mortgage restructuring may help you to stay in your home by making your mortgage more affordable. Loan modification types include:

  • Reducing the interest rate

  • A reduction of the loan principal

  • Stretching out the payments for a longer time frame

In the case of principal reduction, the amount of the reduction may be considered taxable income.

If your lender does send you a IRS Form 1099-C at the end of the year, be sure to check it against your own figures. If it contains misstatements contact your lender to have the form corrected.

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Donna Podesta

I am an experienced Realtor working in the Greater Hudson Valley Region which includes both Rockland and Orange County. My goal is to make my client's real estate experience a happy one. Because succe....

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