Thanks to the ever vigilant Arizona Mortgage Guru, we now know that the Mortgage Forgiveness Debt Relief Act has passed the US House. Next stop is the Senate, where I suspect it will pass and go on for signing by the President.
What is the Mortgage Forgiveness Debt Relief Act?
Currently, if part of your mortgage debt is "forgiven" via a short sale (selling your home for less than what you owe), the lender is required to send a 1099 income form in the amount of the forgiveness to our pals at the IRS, who then turn around and want you to pay taxes on that "income" — at your ordinary income rate.
The Mortgage Forgiveness Debt Relief Act will eliminate this nasty little side effect of a short sale. My understanding is it will only be available on your primary residence.
[tags]Mortgage Forgiveness Debt Relief Act[/tags]