Forgiveness is scheduled to End
Matt’s Take on the News
January 5, 2012
Forgiveness is scheduled to End
Business Wire reports that the Mortgage Debt Forgiveness Act is scheduled to end at the end of 2012. This act provided forgiveness on tax “gains” that result from discounts on primary mortgages on primary homes (this does not apply to home equity lines on homes). According to Brian Gubernick of Scottsdale-based Home-helper Consultants, “If you owe a debt to someone and that debt is forgiven, the amount they forgive can be taxed,” said Gubernick. “Right now, many borrowers are able to avoid tax liabilities resulting from the debt cancellation, but when the debt relief act expires in 2012, many will face a substantial tax burden that could have potentially been avoided.”
We will see if this act is extended before it expires.
News Article
New Year’s Resolution: Get Out of Your Underwater Home
Mortgage Forgiveness Debt Relief Act tax breaks set to end in 2012
SCOTTSDALE, Ariz., Dec 27, 2011 (BUSINESS WIRE) — Each New Year begins with the same resolutions: Spend more time with family, go to the gym and lose weight. In 2012, the resolution for many will be: Get out of debt. For homeowners, it’s time to start thinking about how underwater they may be in their homes.
With surges in home foreclosures and the upcoming expiration of the Mortgage Forgiveness Debt Relief Act, homeowners need to ask themselves: Do I continue to pay my mortgage when I’m so far upside down, or can I even afford to continue paying my mortgage?
A CoreLogic study showed that 49 percent of Arizonans with home loans have negative equity in their homes, making Arizona the second-worst state in the nation. Brian Gubernick of Scottsdale-based Homehelper Consultants has helped hundreds of these underwater homeowners navigate their options and begin the road to recovery.
“Short selling can be a great option to avoid foreclosure and get out from underneath your home,” said Gubernick. “That said, a short sale isn’t always the best solution for everyone. We work with our clients to evaluate their situation, review their options and help them with the solution that best fits their needs.”
One of the greatest assets to underwater homeowners has been the Mortgage Forgiveness Debt Relief Act that allows many to avoid large tax liabilities tied to their short sale and foreclosure transactions.
“If you owe a debt to someone and that debt is forgiven, the amount they forgive can be taxed,” said Gubernick. “Right now, many borrowers are able to avoid tax liabilities resulting from the debt cancellation, but when the debt relief act expires in 2012, many will face a substantial tax burden that could have potentially been avoided.”
“According to Zillow, home values in the Phoenix area have dropped 53 percent over the past five years,” added Gubernick. “With little hope of rebounding in the near future and the expiration of the debt relief act, the time to act is now. Short sales can take many months to complete, so to beat the deadline, homeowners need to start the process by April, if not sooner.”
