Tuesday, October 16, 2012
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Many of you are just beginning to consider doing a short sale on your home. If your mortgage is underwater and you feel there are no other options short of allowing the bank to foreclose on the property, a short sale may be the perfect solution. But along with this solution comes some important questions – particularly having to do with taxes.
Will you have to pay taxes on the money you are forgiven from repaying on a short sale?
For the most part, the answer is no.
If you sell your home, the short sale is approved by the bank(s) and the property makes it to escrow and closing by the end of this year (December 31, 2012) then there is a good chance you will not owe any taxes on that forgiven amount.
Also for the money that is being forgiven, or discharged, if it was entirely used only to purchase the property rather than used as funds you accessed through the equity on your home so that you could spend it elsewhere, then there is a good chance that you will not pay taxes on it.
Rental properties for the most part are also not taxed through the end of this year if involved in short sales.
The important thing to remember is this: every situation is unique and each property has aspects to it that will likely not be like any other short sale situation. For this reason, the best way to truly confirm whether you will owe any taxes on your short sale is to meet and consult with a Certified Public Accountant. If you would like some references for CPAs in our local area, we would be happy to provide them.
If you would like guidance, advice or even if you would like simply to review your options – contact us today. We look forward to helping you!
There are two websites where you can get more information and find out if this program is right for you:
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