The elections are over. The party in power will change at the national level as well as in many states. The public should expect those currently in office to address non partisan issues in the best interest of homeowners. One such issue is the extension of the ‘Mortgage Debt Forgiveness Tax Relief Act’.
If the act is allowed to lapse as it is scheduled to do at the end of the year any debt forgiven by a lender because of a short sale or deed in lieu of foreclosure will be taxed as income. It doesn’t seem right that a homeowner should be taxed on money they never had. If you bought a home before the bubble burst for $200,000 and now must either sell it for $150,000 or deed it back to the lender you will be liable for ‘income’ tax on the $50,000 of debt that was forgiven. Without re-authorization of the Act the IRS will once again be ‘pouring salt in the wounds’ of those caught in the collapse of the real estate market.
Let your Congressman & Senators know you think it is only fair that the act be extended. Without the extension additional properties will remain in the ‘shadow inventory’ depressing the market values and slowing the recovery. What you read about the market in metropolitan areas does not translate to rural areas. The rural market is still very slow to recover to post crash levels.