Palm Harbor short sale real estate is going to be different soon because the short sale tax credit is going away. Over the past several years, many homeowners have used a short sale to get out from under a home that is worth less than is owed on it, including residents of Palm Harbor. It is a good option because it keeps them out of foreclosure when they are unable to find another way out. While it is a great relief, it's also a great burden when it comes to your tax return. In response to that, Congress passed the Mortgage Debt Relief Act to help out.
A short sale is when a lender agrees to accept less than what you owe on your home in order to release you from your mortgage. Basically, short sale credit involves forgiving part of your debt. But as far as the IRS is concerned, forgiven debt is income which means that they are taxed. That can mean a huge tax bill come April. In response, Congress passed the Mortgage Debt Relief Act in 2007 which exempts the debt forgiven in a short sale from taxes for up to $2 million (married couples filing separately are eligible for $1 million each).
This was a great relief for homeowners, and Congress figured that the bad economy would be better by 2012 and the exemption would no longer be widely needed. So they made the law effective through 2012. As we now know, we are still firmly in the grip of the Great Recession, and homeowners who need to take advantage of this short sale tax credit need to list their property now in order to get the short sale completed by the end of the year.
Many Palm Harbor realtors are finding that homes are selling more quickly than in years past. Most sales are taking a few months, rather than a year or more. If you are under water on your mortgage and are thinking that you want to wait until prices rise, you may be risking your credit rating and a higher tax bill. So our Palm Harbor potential sellers should list now, so that you can sell by the end of the year. Also get the paperwork for the short sale in process so you can be ready to sign on time!
If you have any questions about doing a Palm Harbor Short Sale in time to take advantage of the tax credit, please give us a call today! 727-366-0324