Right now, if you're a homeowner and do a short sale on your home, you may be able to claim special tax relief and exclude up to $2 million of debt forgiven on your principal residence under the federal Mortgage Forgiveness Debt Relief Act of 2007
Check with your tax advisor to see if your state has a similar mortgage forgiveness debt relief law. Depending on your specific situation, you could be eligible for up to tens of thousands of dollars of tax savings under these laws.
But, you better act quickly because both the federal and California laws have an important deadline rapidly approaching. They are both set to expire on December 31 of this year. Considering how long it is taking for the average short sale to close (including finding a buyer, getting the short sale approved, and then closing the sale....assuming your buyer has stuck around long enough through the lengthy approval process and you don't have to find another buyer), if you are serious about closing a short sale before December 31, 2012, you should start the processimmediately. Otherwise, by the time you close, you could find yourself facing a big, unhappy tax surprise.
The author, Jeffrey H. Lerman, Esq., has established a nationwide reputation as "The Real Estate Investor's Lawyer". He has appeared on TV, radio and in front of numerous real estate investment clubs as an expert. He has been President of the Marin County Bar Association, Chair of the State Bar Real Estate Litigation Section and Chair of the Marin County Bar Association Real Property Section. He has lectured at UC Berkeley Fisher Center for Real Estate & Urban Economics and the USC Law Center. He's Managing Partner of Lerman Law Partners. Jeff has been practicing law for over 30 years and is the former general counsel for two national real estate syndication companies. He has published articles nationwide and is a highly sought-after speaker. He's also a real estate investor and a real estate broker. You can visit his law firm website at www.RealEstateInvestorLaw.com and his real estate investor education website at www.IEISOnline.com.
