Tax & Debt Relief

Prior to the Mortgage Debt Relief and Emergency Economic Stabilization Act of 2008 being put into effect, money forgiven by a lender in a short sale was considered taxable income. In many circumstances, the new law no longer requires taxpayers to pay federal income tax on the forgiven debt, provided the property is your principal residence only.

Please contact your Tax Advisor for more information. You may exclude debt forgiven on your principal residence if the loan balance was less than $2 million. The limit is $1 million for a married person filing a separate return. The law applies to debt forgiven in 2007, 2008, 2009, and the Economic Stabilization Act of 2008 has extended this forgiveness through 2012. It includes debt reduced through mortgage restructuring, refinancing, home equity lines of credit, short sales as well as mortgage debt forgiven in connection with foreclosures. As a reminder, this is debt that was used to buy, build, or improve a principal residence only. Also, there has been a change in the laws for debt forgiveness.

Please contact your Tax Advisor for more information.

For more information please visit : http://www.irs.gov/taxtopics/tc160.html

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