Homeowners, who go past 2012 with no loan mod and have to short sale, could have a huge tax bill. Some short sales take a year. Homeowners who wait until 2012 may have a short sale close in 2013 and face a huge tax bill.
Expert Home Solutions Inc. says “Be Concerned.” Here’s how the 2007 Act works. If your lender forgives any of your loan, it is reported to the IRS as ordinary income. That income could add over $100,000 to your taxable income. The 2007 Act forgives that tax.
Congress created a bi-partisan 12-member committee to reduce the $1.5 trillion dollar tax deficit. Everything is on the table including the tax deduction for mortgage interest and property taxes. This tax credit, which allows homeowners to exclude up to $2 million dollars in mortgage debt forgiveness, is an easy fix. Remember, Congress didn’t extend the first-time buyer credit.
2012 is a presidential election year. There is no telling who will be in power or what the political ear will be willing to hear.
Even the current mortgage interest tax deduction is under scrutiny. The committee estimates that by limiting mortgage interest and other itemized deductions for household incomes above $250,000 or individuals over $200,000, they can shave off $250 billion from the deficit. Why not allow a temporary act already scheduled to expire for everyone in 2012 disappear? This will affect people making a lot less than $250,000.
Homeowners need to think hard. Banks can keep homeowners on the hook paying if they face serious taxes. They can foreclose if homeowners can’t pay.