Since 2007, the Mortgage Debt Relief Act has allowed owners selling their homes through a short sale to do so without having to pay tax on the amount their mortgage holders forgave them. The tax change means that if a house is sold for $75,000 less than what’s owed on the mortgage, the seller would owe federal income taxes on that amount.
If the seller is in the 15% tax bracket, they would owe the IRS $11,250. Some real estate analysts think doing away with the tax incentive will sabotage the government’s efforts to gradually move people out of homes they can no longer afford. That will end in 2013, giving homeowners until the end of this year to get out from under their debt without facing tax consequences.
Tim Becker, director of the University of Florida's Bergstrom Center for Real Estate, said the tax change may force some owners to walk away from their homes outright. Letting the tax exemption expire doesn't make sense and runs contrary to the government's attempts to bring some financial stability to the housing market, Becker said.
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Jerry LaRose is an Orlando Area Residential Real Estate Expert and Foreclosure Specialist who can assist you with the purchase and/or sale of Real Estate in Orlando, Windermere, Winter Garden, Kissimmee, St. Cloud, East Orlando, Longwood, Altamonte Springs, Maitland, Winter Park, Oviedo, Apopka, Lake Mary, Clermont, Ocoee Florida or any place in the country. Jerry has created a team of professionals throughout Orlando and the country to ensure that you enjoy a smooth transition to your new area.
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Good information, especially if you deal with short sales representing sellers.