The Mortgage Forgiveness Debt Relief Act Set to Expire on Dec 31 2012 - Team1Realty Fairfield, CA

Online, April 20, 2012 (Newswire.com) - Property owners in Alameda, Contra Costa, Sonoma, Solano and Napa Counties facing foreclosure and thinking about doing a short sale might want to hurry up. The time is limited for homeowners who want to ensure they aren't hit with a big tax bill because they had to walk away from a mortgage obligation. The Mortgage Forgiveness Debt Relief Act is set to expire on December 31, 2012.

The Mortgage Forgiveness Debt Relief Act was introduced in Congress on September 25, 2007, and became law on December 20, 2007. This act generally allows taxpayers to exclude income from the discharge of debt on their principal residence. This act offered relief to homeowners who would formerly owe taxes on forgiven mortgage debt after facing foreclosure.

The Mortgage Forgiveness and Debt Relief Act applies to debt forgiven in calendar years 2007 through 2012. It has not yet been determined if the Mortgage Forgiveness Act will be extended past 2012.

In summary, the Mortgage Forgiveness Debt Relief Act states that if you borrow money (up to $2 million dollars) from a bank or a commercial lender and the lender cancels or forgives the debt (a.k.a. Short Sale) then you are not responsible for paying taxes on the forgiven amount. This applies only to primary residences, NOT investment properties.

Upon the completion of a successful short sale transaction, your bank is required by law to provide the IRS with a Form 1099-C. The 1099-C will show the IRS the amount of debt which was cancelled or forgiven. Before December 20, 2007, (this is the date which the Mortgage Forgiveness Debt Relief was enacted) the amount of forgiven debt was considered to be taxable income. This is no longer the case for primary residences; however, all this could change if the Mortgage Forgiveness Act is not extended. Please click the attached link to view the Mortgage Forgiveness Debt Relief Act as it appears on the IRS web site (click link) http://www.irs.gov/individuals/article/0,,id=179414,00.html

Team1realty.com is your Home and Land Specialist. Our role as real estate agents is to guide you through the buying or selling process, taking the time to make sure you understand every step of the transaction. So, if you are having difficulty in paying mortgage and wants to know your options to avoid foreclosure or have any questions on short sale then call us directly at 800-533-7107.