Short sale or foreclosure may affect your income tax because of The Forgiven Debt Law. I am not a tax lawyer, or an attorney of any kind, nor am I qualified to offer any kind of legal advice, but from my understanding this law requires some types of forgiven debt to be claimed as a taxable income.
The Mortgage Forgiveness Debt Relief Act expired at the end of 2012, but was extended through 2013 when Congress and President Obama came to an agreement as part of the American Taxpayer Relief Act of 2012, or the fiscal cliff bill. Many in the real estate industry and homeowners as well are hopeful that the California’s mortgage forgiveness debt relief act will be extended as well.
If you have questions about your specific tax situation, be sure to consult your CPA or a qualified tax attorney. If you’d like to pursue a short sale and/or have questions about the process, give us a call and let’s talk:
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