December 7, 2012
Three Weeks Left To Discharge Your Mortgage Debt Tax Free
Speaking of the end of the year, the 2007 Mortgage Forgiveness Debt Relief Act is set to expire at the end of 2012.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
While the expected expiration of the Act likely fed the 35 percent increased in short sale volume across the US over the past year, listings of short sales in San Francisco have dropped dramatically from the middle of 2011 when over 225 properties, 14 percent of all listings and the peak of activity in San Francisco, were being offered as short sales.
Currently, less than 20 properties are listed as short sales in San Francisco, 3 percent of all active listings.
First Published: December 7, 2012 12:00 AM
Comments from "Plugged In" Readers
i've paid my mortgage on time and in full for a decade. can i get some forgiveness?
Posted by: dang at December 7, 2012 12:35 PM
you have Dang - in low interest rates. And low property taxes thanks to Prop 13. And if you've had it for 10 years you've got a sizeable gain and can sell it with the first $250k tax free if it is your principal residence. What else do you want - a toaster oven? Those who sold short or got foreclosed on WISH they were in your shoes. And wish they got the bailout that Wall St got. Short sales suck, they just suck slightly less than foreclosure.
Posted by: hangemhi at December 7, 2012 1:56 PM
Home "owners" are the largest welfare recipients in America. Bailouts, tax gifts, etc. etc.
Posted by: khkk at December 7, 2012 8:39 PM
khkk - EXACTLY.
how do i get my bailout? do i need to stop paying my mortgage for a month or more?
Posted by: dang at December 7, 2012 11:08 PM
It's a free market on the way up, but not on the way down. Same thing as WS.
People who overpaid but overextended often got a bailout (reduced principal or forgiveness through foreclosure). People who overpaid but could manage got cheap cheap rates.
Today in SF we're seeing a rebirth of the 2002-2006 behavior: hysterical open houses, wild multiple overbids, cash offers with no contingency on dumps after less than a week.
There's an economic recovery and SF fairs better than the rest thanks to a ton of cash waiting to be put to use. There's still a bit of excess...
Posted by: lol at December 8, 2012 8:21 AM
Dang - If you haven't gotten your bailout yet (record low interest rates) then you're doing it wrong and have only yourself to blame.
Smart homeowners are taking advantage of their bailout, which bailout you get just depends on if you are underwater or still have equity. Underwater? Default tax free. Have equity, refi to crazy low 30yr fixed interest rates.
Posted by: Rillion at December 10, 2012 9:36 AM