Sunday, July 29, 2012
Missing This Important Deadline Could Cost You Tens of Thousands of Dollars
Right now, if you’re a homeowner and do a short sale on your home, you may be able to claim special tax relief and exclude up to $2 million of debt forgiven on your principal residence under the federal Mortgage Forgiveness Debt Relief Act of 2007 AND up to $800,000 of forgiven debt under California SB 401, the Conformity Act of 2010 (if you’re not a California resident, check with your tax advisor to see if your state has a similar mortgage forgiveness debt relief law). Depending on your specific situation, you could be eligible for up to tens of thousands of dollars of tax savings under these laws.
But, you better act quickly because both the federal and California laws have an important deadline rapidly approaching. They are both set to expire on December 31 of this year.Considering how long it is taking for the average short sale to close (including finding a buyer, getting the short sale approved, and then closing the sale….assuming your buyer has stuck around long enough through the lengthy approval process and you don’t have to find another buyer), if you are serious about closing a short sale before December 31, 2012, you should start the process immediately. Otherwise, by the time you close, you could find yourself facing a big, unhappy tax surprise.