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Saturday, March 27, 2010

Temecula Short Sale & the IRS


Temecula Short Sale & the I.R.S.
Generally, the Internal Revenue Service (IRS) treats debt forgiveness by a creditor as taxable income.  However, under federal legislation that took effect in 2007(Mortgage Forgiveness Debt Relief Act of 2007), certain home mortgage debt cancellations—such as loan modifications, short sales, or foreclosures—may be exempted from federal taxes.

The federal tax exclusion only applies to mortgage balances on your principal residence -- your main home -- and not on second homes, rental real estate or business property. The maximum amount of forgiven debt eligible under the law is $2 million for married taxpayers filing jointly and $1 million for single filers

If you want to claim the debt-forgiveness exemption, download IRS Form 982 at www.irs.gov and attach it to your return for the year in which the debt was forgiven. And don't assume that this tax code benefit to homeowners will be around forever. It expires at the end of 2012.