Don’t Forget that Tax Relief for Short Sales, Foreclosures and Loan Modifications Will Expire

As  we’ve seen in recent months, the long term housing outlook is starting to look up.  

Did you know that 2011 is projected to be the peak year for foreclosures?   If you are a distresses  property owner who is headed to short sale,  foreclosure or in the process of having your loan modified  you need to know that any mortgage balance that is wiped away, by one of the  above senerios, is taxed as what the IRS refers to as cancellation of debt.   If you are familiar with the Mortgage Debt Forgiveness Relief Act of 2007, you know that the IRS is not charging income taxes on this cancellation of debt, that is brought about by a foreclosure, short sale or loan modification through 2012.  

This relief is set to expire in 2012.   Keep in mind that the average short sale  process can take many months and if your looking at the foreclosure process,  some states are averaging 22 months.   If you know that you have a foreclosure, short sale or loan modification on the horizon, don’t put things off.  Talk with your lawyer and CPA.  Try to take steps now to get closure on your home and your loan.

I’m looking forward to the day that we can move past the short sale and foreclosure crisis that has taken a toll on all Americans.  

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