The Mortgage Debt Relief Act of 2007 is set to expire in December. What does this mean? Basically this: For those those of you who are facing a potential foreclosure, or short sale situation, the government has been offering a holiday on the capital gains taxes that could potentially be incurred as a result of the event. This will be ending soon.
This is how this all works in plain English. If you short sell a home or lose it in foreclosure, and that home is worth $500k, but it only gets $400k, then the $100k difference has traditionally been considered a taxable event. This means that if you are in, let’s say the 28% tax bracket, you could owe somewhere in the neighborhood of $28,000 in federal taxes! Although the government has not been enforcing this practice since 2007, it is scheduled to recommence taxing the heck out people at the end of this year.
So here’s the take away – If you are facing a foreclosure, or you might have to short sell a home, start working with a great real estate agent now to list those homes and get them sold before the end of the year dead line. The savings difference to you could literally be tens of thousands of dollars.
… I know a great agent you can use.