Zaida Patel, Realtor —– Blog Website

We receive lots of questions about tax liability of short sales and foreclosures.  As real estate brokers we are not licensed to give advice on this topic however we can lead you to the information that may answer your questions.

On December 20, 2007 the Mortgage Forgiveness Debt Relief Act of 2007 was enacted. Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.  More information regarding the Mortgage Debt Relief Act can be found on the IRS website below:

http://www.irs.gov/individuals/article/0,,id=179414,00.html

Or the California Association of Realtors, Legal Department has put together an FAQ regarding the taxation of Foreclosures, Deeds in Lieu of Foreclosure, and Short Sales. This is more detailed and specific to California.      For more information, please click here.

According to the California Association of Realtors, qualified, first-time home buyers using a Federal Housing Administration (FHA)-insured mortgage now can apply the $8,000 federal tax credit toward their down payments, the U.S. Dept. of Housing and Urban Development (HUD) recently announced.

Currently, borrowers applying for an FHA-insured mortgage are required to issue minimum down payments of 3.5 percent. Buyers still must issue the mandatory 3.5 percent down payment, but the tax credit now can be used as an additional down payment, or for other closing costs, which can help lower principal balances and monthly payments.

To read the full story, please click here