Find out about the short sale tax benefit that recently got extended until January 1st, 2014.
Online PR News – 05-January-2013 – Tallahassee, FL – The Short Sale Tax benefit (called the mortgage forgiveness debt relief act and debt cancellation)is being extended another 12 months. What this does is eliminate any tax on debt relief gained in a short sale of a principal residence and it has been extended until the year of 2014. The act will officially end on January 1st of the new year. If this extension were not in place, debt that was relieved by the bank because they owe more on their home than it will sell for would be taxed as ordinary income, which is why it is called short sale tax.
Homeowners who need to go through a short sale can now proceed again. This short sale tax benefit is going to be helpful to people all around the country. It will now be much more affordable for a lot of families to move and sell their home. Additionally, if someone happens to owe more on their home than what it is actually worth, they can now do a short sale. Short sales have very little impact on your credit, which means you will be able to buy a home again in the future without much complication. A short sale is typically the best route to go if you're trying to get out of your home and not be in debt for the rest of your life.
If this short sale tax benefit was not extended, a seller would have to pay income tax on debt that the bank forgave them for. What this means, is less people would be able to sell their homes, since they would not be able to afford this income tax. People would stay in their homes for many more years, which essentially would eliminate them from the market. There would be less homes for sale and this would drastically affect the real estate industry. Keep in mind, about 40 percent of everyone who buys a home has to sell their current home first. If people are not able to get this relief from the short sale tax benefit act, then they may decide to stay in their home, and they will never be able to move. Taking this into account, it is part of the reason why the real estate industry has been affected so heavily in recent years. Many homeowners have been unable to move because of the amount of money that they owe on their homes, which causes less homes to be on the market. With the continuation of this recent short sale tax benefit, a lot of homeowners will be encouraged to sell and buy a new home. It will substantially benefit the economy.
Keep in mind, a short sale is where you can sell your home, and be relieved for any debt that you owe on top of what your home sells for. With this short sale tax benefit, you will not pay income tax on this debt, it will simply be forgiven by the lender, the bank. Short sales take a considerably lengthier period to close than traditional home sales do. They can sometimes take as long as six months, so you have to be prepared for this process before you begin the short sale. Also keep in mind, the home is going to sell for considerably less money than it normally would.
Joe Manausa MBA is a 20+ year veteran of real estate brokerage in the State of Florida and has been investing in real estate since 1992. Find more about the Short Sale Tax at, http://www.manausa.com.