The “fiscal cliff” bill that was passed and signed into law earlier this month included two very important real estate related provisions for homeowners who are considering selling their homes as a short sale and homeowners who pay a monthly mortgage insurance premium.
Real Estate Provisions in Fiscal Cliff Bill
- Mortgage Forgiveness Debt Relief Act extended through 2013
- Tax deduction for mortgage insurance premiums extended through 2013
Impact of These Extensions
Typically, when mortgage debts are cancelled through a short sale, foreclosure, or deed-in-lieu, homeowners receive a 1099-C in the amount of the debt cancelled from their lenders; and the amount on the 1099-C is then considered taxable income. However, thanks to the passing of this recent legislation, any debt forgiven (such as through a short sale) in 2013 on a mortgage loan used to purchase or improve a primary residence will be deemed non taxable income.
Although short sales today account for 20% of our total inventory here in the Greater Phoenix Area, the actual number of Active short sale listings is lower than it has been in over five years. This makes 2013 an even more ideal year to short sell your home, because not only is the Mortgage Forgiveness Debt Relief Act still in effect, but now there are fewer distressed listings to compete against!
Another part of the fiscal cliff bill extended a tax break that was created in 2007 to help homeowners who pay private mortgage insurance (PMI) premiums. Through 2013, the break will allow qualified couples and single taxpayers to take a partial or full tax deduction on the insurance premiums they pay each month. If you pay PMI for your mortgage, remember to consult with a tax adviser this year to see if you qualify for this deduction.
And if you would like more information about short selling your home in 2013, please call the phone number listed in the sidebar of this page or send us a message here.
**DISCLAIMER: None of the statements on this website should be considered legal advice. If you are interested in receiving legal advice and/or representation, please contact an attorney.**