Now this is motivation for sellers of short sales in Florida!
Struggling Floridians have saved tax expenditures with a nearly five-year-old federal tax break that is about to go away. Since 2007, homeowners whose banks have forgiven unpaid mortgage debt after a short sale, principal reduction or foreclosure have not had to count that money as income on their tax returns. It’s meant savings of tens of thousands of dollars on the so-called “phantom income” depending on the amount of debt canceled and a person’s tax bracket. But the Mortgage Forgiveness Debt Relief Act of 2007 will sunset Dec. 31.
With just six months before the scheduled expiration, you should urge homeowners considering a short sale to put their properties on the market now so they can sell before year’s end. Of course, not everyone can benefit from the debt relief act. It only covers forgiven debt on principal residences and up to $2 million, or $1 million if married but filing separately. The act also does not apply to second mortgages where the money was used for non-household expenses. There are other tax rules that can affect how homeowners benefit from the debt forgiveness act, but any relief for a homeowner right now is helpful.