The Mortgage Forgiveness Debt Relief Act is Expiring
What is My Tax Risk if I Wait?

Short Sale or Foreclosure Before December 31, 2012 Short Sale or Foreclosure After   December 31, 2012
  • Example: If you owe $300,000 and the property sells for $200,000
  • $100,000 difference in reported income is NOT taxable in most cases
  • $100,000 @ 0% = $0 in additional taxes owed to the IRS*
  • Example: If you owe $300,000 and the property sells for $200,000
  • $100,000 difference in reported income IS taxable in most cases
  • $100,000 @ 35% tax bracket = $35,000 in additional taxes owed to the IRS*
*Not all properties qualify. View the IRS Mortgage Forgiveness Debt Relief Act to see if your home qualifies.

What are other homeowners doing?
Many homeowners that are considering a short sale or a loan modification have decided that instead of waiting for the market to come back they are opting to sell their house now.  If you owe more than your house is worth, it will take time to break even.  If you decide to sell your house BEFORE you break even, there will be debt that is settled by the lender.  Pursuit of a short sale AFTER this deadline expires will be subject to additional tax liability.

loan modification vs short sale

Find out how long it will take to break even

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