Has your Tucson real estate agent told you about the Mortgage Forgiveness Debt Relief Act and how it can save you money in the future? If you’re just beginning the short sale process with your Tucson real estate agent, they may not have explained that part to you yet but it’s important that they do; if they don’t you need to ask about it.
Currently the MFDRA is in effect for all homeowners that complete a short sale on their primary residence. The MFDRA makes them exempt from paying taxes on the forgiven amount when they file their taxes in 2014. Some Tucson real estate agents say that their clients weren’t even aware they would have to pay taxes on the forgiven amount, but this is how it works. When you complete a short sale on your home, you’ll receive a Form 1099 from your lender that shows the forgiven amount as taxable income, which is how it is viewed by the IRS. So, say you sell your home for $200,000 but owed $275,000 on it; if the MFDRA wasn’t in effect, that $75,000 difference would be shown on your Form 1099 and would be taxed next year when you file. This obviously can add up to quite a bit of money, especially for a homeowner that is starting to rebuild financially. This is why Tucson real estate agents want you to know that if you haven’t begun the short sale process, you really should do so. The Mortgage Forgiveness Debt Relief Act is scheduled to expire at the end of 2013 so your short sale transaction needs to be closed on or before December 31st.
In the very rare chance that you don’t qualify for the MFDRA, your Tucson real estate agent may be able to provide you with other tax alternatives. For additional information, to see if you qualify or to learn more about what you need to do to begin the short sale process, get in touch with a Tucson real estate agent immediately.