Tuesday, July 10, 2012

The Mortgage Forgiveness Act's Set To Expire

Until now people whom had sold there home via short sale did not have to count the forgivable unpaid debt as income on there tax returns. This is because of the mortgage forgiveness act of 2007. This act ends on December 31st of this year. An example of what that means to you is Jeff Shingledecker. His home went on the market in April of 2012. Within 24 hours the home had a full price offer of $105,000 and currently still under contract. This left him, as with so many other Americans, with a debt of $118,000 still not paid to the lender to be forgiven. If he sold the home prior to the end of the relief act he will not owe any money on the relief of that debt. If the home sells after the relief of the debt he will owe the government $29,500 in tax's on the cancelled debt given his tax bracket. That is nearly 30 percent of the debt the government will now collect. During the firth three months alone, 6649 short sales where completed in Palm Beach, Broward and Dade counties. With home price's already rising and inventory already depleting there is no measurable way to grasp what this will do when people look at whether to do a short sale all together. Most people will consider options, including simply filing for bankruptcy and keeping the house as opposed to having to pay nearly $30,000 in a year for every $100,000 the bank forgave on a 30 year loan.

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