Debt Relief = Income
Many times a homeowner might feel relieved being out from under the obligation of a mortgage they can’t afford even though the property was lost due to foreclosure or short sale. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious for manyJohnson County homeowners.
Congress enacted the Mortgage Relief Act specifically to help homeowners who might be affected in the housing crisis that started approximately in 2007. The Act expired on 12/31/12 but was temporarily extended by Congress until December 31, 2013. The Char MacCallum Real Estate Group has been working with many Olathe and surrounding Kansas City homeowners to educate and assist through the bankruptcy and foreclosure processes
This relief only applies to a taxpayers’ principal residence which does not include second homes and investment property. The maximum amount is limited to $2 million of mortgage debt forgiveness or $1 million if filing separately. Many of our Johnson County homeowners are well under this mortgage amount, but any home debt in a foreclosure situation can be extremely stressful on a family.
Another provision is that the debt relief is limited to acquisition indebtedness used to buy, build or improve the property. It excludes cash equity loans whether made separately or in a refinance of the original mortgage.
Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals. If you are experiencing cash flow issues or are considering a foreclosure or short sale on your home, please contact Char at the Char MacCallum Real Estate Group. Char is a Certified Distressed Property Expert and can help you navigate through the foreclosure and short sale process while helping your best interests in mind. The office is 913-782-8857 or you can email firstname.lastname@example.org