Posted by: Catherine | December 5, 2007

Debt Forgiveness Tax – Relief May be in Sight


As you know, if you’ve been reading this blog, or simply paying attention to our local housing market. Contra Costa, Alameda and Solano counties in the Bay Area are among the many counties in California experiencing record numbers of foreclosures, short sales and property owners in distress.  One hiccup though for many homeowner’s financial future, is to have a short sale accepted, and they are now relieved of their obligation to repay the bank the balance of their loan – but did you know that whatever debt the bank “forgave” can now be taxed by the IRS as income?  Is that crazy?  If you couldn’t afford to continue your mortgage payments, what makes the IRS think you can now pay taxes on amount that sometimes exceeds your annual income?  For most, you simply can’t. 

The Mortgage Foregiveness Debt Relief Act of 2007 (H.R. 3648) would eliminate tax on debt forgiveness.  This Act has passed the Ways and Means committee and is awaiting Senate Approval.  The hope is that it will pass the Senate and sale smoothly over the President’s desk with a seal of approval.  This will be retroactive and will help anyone who has had a purchase money debt forgiven during 2007.  Stay tuned here for news as we follow the (hopeful) passage of this very important tax relief legislation.

Press Release from Ways and Means Committee:
http://waysandmeans.house.gov/news.asp?formmode=release&id=564

Summary of H.R. 3648 Mortgage Forgiveness Debt Relief Legislation:
http://waysandmeans.house.gov/media/pdf/110/Markup%20Summary4.pdf

You can follow the progress of this Debt Relief Act here:
http://www.govtrack.us/congress/bill.xpd?bill=h110-3648

Remember, we are not attorneys or tax specialists. Seek counsel from your attorney, CPA or tax specialist to advise on your specific situation.

For more information or information about selling your home, short sales, buying foreclosures or REO’s, contact:

Catherine Myers
www.DiabloValley.net

Terry Osburn
www.TerryOsburn.com

Specializing in Contra Costa County: Walnut Creek, Concord, Clayton, Pleasant Hill, Martinez, Lafayette, Alamo, Danville, Antioch, Bay Point, Pittsburg, Brentwood, Oakley.


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