Homeowners who sold their home as a short sale and their REALTORS® sighed in relief today as the U.S. Senate followed the U.S. House of Representatives meaning Congress finally approved an extension to the Mortgage Debt Forgiveness Act of 2007. This act has exempted sellers who sold their primary residences on a short sale to avoid being taxed on forgiven debt.
The Debt Forgiveness Act had expired at the end of 2013 leaving those residents in Las Vegas and nationally, who were planning on completing a short sale in 2014, in a position to potentially be taxed on large amounts of debt that could be treated as income.
The extension bill approved today retroactively includes eligible short sales that closed at any time during 2014. The caveat is that the bill approves short sales that closed during 2014 only. A new extension, which seems very likely to be approved, will be left to the incoming 2015 Congress. The reason another extension is likely is that Washington will want to have a new extension that allows for a reasonable and noticed end date, and not simply cutting off homeowners past 2014. A lot of potential Las Vegas sellers have been on the fence about whether to list their homes this past year because the extension was not in place. The down side to that inaction is that another year then passes and the seller never moves forward to address their debt and financial recovery.
Las Vegas Sellers who sold their home in 2014 should obtain professional tax advice to see if they qualify to get the debt exemption. I recommend either a CPA or enrolled agent level tax professional on this issue. The cost is far less expensive than you think and making sure that tens of thousands of dollars of debt are not counted against you, demands you get properly advised.
Any homeowners who, despite the recent run up in prices and are tired of being underwater, can call Paul Rowe at Shelter Realty for a no obligation review of their situation. You may reach Paul at 702 376 7379 or email him at info @ shelterrealty dot com.