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Mortgage Debt Relief Extended

Extensions that passed the House and Senate have now been signed by the President and the Tax Increase Prevention Act of 2014 extended numerous tax provisions that expired in 2013. These extensions include things like tuition deductions, state tax deductions.

Most importantly, for some homeowners, the Mortgage Debt Forgiveness Act was extended through 2014. This extension gives relief to those that sold their primary residence via short sale in 2014. Normally, any short sale, or forgiven debt, was treated as income to the borrower which shocked many sellers at tax time. Since 2007, there has been an exception to the federal tax code that allowed sellers that sold their primary  homes short sale to do so with the forgiven debt treated as non-taxable. The nationwide estimated average debt forgiven is estimated at approximately $88,500. Here in the Atlanta market, we have seen a sharp decline in the number of short sales. Looking close in town, in 2014 we have seen the average sales prices and closed sales going up over previous years. With the current trend, short sales should continue on their decline. For anyone still considering selling their primary home via short sale, keep in mind that the Tax Act only covers through 2014 and we do not know if it will be extended through 2015.

The Act is only a short-term provision so these extensions will need to be addressed again.  Want more information? Check out bill H.R.5771.

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