Mortgage Debt Relief Act Survives Fiscal Cliff
With all of the fiscal cliff talks in the past couple of weeks, many forgot that the Mortgage Debt Relief Act was set to expire on December 31st. The Mortgage Debt Relief Act allows a homeowner that negotiates a settlement for mortgage debt on their primary residence, (usually a short sale or loan modification), to not have to claim the debt forgiveness as income on their taxes. This is great news for our local Bend real estate market.
Here’s an example of how it works. Lets say a homeowner owes $200,000 on their home and short sales it for $120,000. If this Mortgage Debt Relief Act wasn’t in place, the home owner would then have to claim the $80,000 that was settled as income on that years taxes. We’re talking about a lot of tax implications here. With the act in place, the homeowner will not have to claim any additional income on their taxes. It’s hard to imagine losing your home, then having to pay thousands of dollars in additional taxes.
Although we aren’t seeing as many short sales in our marketplace as we did in the past few years, they are still part of our market. This will help a great number of local Central Oregonians.
I was relieved to see that this passed. Let’s hope congress gets it’s act together and figures out a solid plan for the rest of our countries financial issues.