Knoxville Short Sales – Will The Mortgage Debt Relief Be Extended?
For those Knoxville homeowners who have completed a short sale
or plan on completing a short sale, the extension of the Mortgage Debt Relief Act is very important. On December 31st, 2013, the Mortgage Debt Relief Act
expired, meaning that any homeowner that completed a short sale this year would have to pay income taxes on the forgiven debt, if the act is not retroactively extended by the end of the year.
So, will the Mortgage Debt Relief Act be extended?
It all comes down to Congress, who is currently in their last session of the year. If Congress opts to retroactively extend the act, any homeowner that completed a Knoxville short sale this year would not be required to pay income taxes on the forgiven income, so long as they meet the requirements. If the act is not extended, any homeowner who completes a short sale this year would be responsible for paying taxes on their forgiven debt. Luckily, the Mortgage Debt Relief Act is one of the items on the agenda for Congress to vote on.
The Mortgage Debt Relief Act has been a very important to those homeowners who have completed a short sale. Prior to the act being enacted, if a homeowner sold their house for $40K less than it was worth and had that debt forgiven by their lender would be required to pay to pay $40K worth of income on the forgiven debt. Obviously, for someone struggling to pay his mortgage, this would be very difficult to pay.
With Knoxville short sales expected to continue into 2015, the extension of the act is very important. The extension of the act is supported by both sides of the aisle, it unfortunately just has not been voted on by Congress yet this year.
If the act is not extended this year, homeowners still have the option of proving insolvency and not paying income taxes on the forgiven debt. The IRS will considers a person to be insolvent if his total debts outweigh his assets. If insolvency is proven, the IRS generally will not require that person to pay taxes on their forgiven debt. If you have questions about whether or not you'd qualify for insolvency, be sure to talk to a trusted tax professional.
Are you facing foreclosure on your Knoxville home? Do you owe more on your Knoxville home than it is worth? If so, please do not hesitate to give Knoxville Home Team a call. We've helped countless homeowners avoid foreclosure on their Knoxville home. Rick can be contact at 865-696-9002 or via email at [email protected]