The following article is my personal opinion only. I recommend that you consult with a competent legal or tax professional before moving forward with a short sale.
In most cases the answer is that a short sale will usually not cause you to owe income tax.
It used to be that you owed income tax on any forgiveness of debt.
When a lender decides to forgive all or a portion of a borrower’s debt, the forgiven amount is considered as income for the borrower and is liable to be taxed.
Here are the following ways you can qualify to short sale a property without any tax liability.
Short Sale of a Primary Residence. The Mortgage Forgiveness Debt Relief Act of 2007 (and it’s extension in the 2008 Federal Bailout) now allows you to short sale a primary residence without any tax liability.
Today when a homeowner short sales a primary residence, they can file a simple form and the forgiven debt is no longer taxable.
The amount of forgiven mortgage debt allowed to be excluded from income tax is limited to $2 million per year.
Short Sale of a Non-Primary Residence: If the property you are selling is not a primary residence, then you may be eligible for tax relief if you are considered insolvent.
I don’t know the exact guidelines, but insolvent is usually considered when your total gross debts are more than your total gross assets. I’m sure a good tax professional can give you more information.
Click here to view the IRS’s website about the Mortgage Forgiveness Debt Relief Act and Debt Cancellation.
Click here to view the article on the IRS’s Website: Mortgage Workouts Now Tax-Free for Many Homeowners.
Thinking about a short sale? I can help you short sale your property and never pay the bank another penny. Send me an e-mail at email@example.com. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (312) 953-6725
Discover how other sellers successfully completed a short sale and request a free consultation by clicking here.
Remember to visit my Chicago short sale blog Short Sale Super Man at www.ShortSaleSuperMan.com
Thinking about a loan modification? Our Chicago loan modification kit has the instructions you will need to get a loan modification approved with your bank. Click here to request a copy.
Thanks for reading this, Phil Buoscio.
Phil is a Real Estate Agent at Better Living Realty – Buoscio Brokerage, Inc.. Chicago Short Sales Realtor:
Phone: (312) 953-6725. firstname.lastname@example.org.
View My homes for sale at www.BetterLivingRealty.com.
Phil Buoscio, is a broker with Better Living Realty he leads the sales team “Phil Buoscio Team” and specializes in short sales in Chicago Illinois. Chicago Loan Modification Help can be referred to you. We don’t do loan modifications ourselves but we work with those who do.
We know Chicago Short Sales. I am a Chicago Short Sale Realtor. Chicagoland Short Sale Realtor. Chicago IL Short Sales. Chicago Realtor. We do business in Pilsen. McKinley Park. Bridgeport. Wicker Park. West Town. Ukranian Village. Lincoln Park. Near North. River North. East Village. Logan Square. Uptown. Edison Park. Portage Park. Hermosa. Lincoln Park, South Loop, West Loop. Bronzeville. Hyde Park. Kenwood. Oak Park. Brookfield. Cicero. Berwyn. Evanston. LaGrange. LaGrange Park. Riverside. We sell condos, single family homes, lots, land, multi units, two flats, three flats, etc.
Copyright 2010 SFI Marketing Institute, LLC. All Rights Reserved. This is not intended as legal, technical, or tax advice. Please speak with a licensed professional before making any decision. Information is deemed reliable but not guaranteed as of the date of writing. The views expressed here are Phil Buoscio’s personal views and do not reflect the views of Better Living Realty – Buoscio Brokerage, Inc..
This information on Chicago Short Sales: Will I Owe Income Tax After A Short Sale? is provided as a courtesy to our viewers to help them make informed decisions.