Debt Relief for Short Sale AZ Tax Relief

Short Sale Tax Relief Debt Forgiveness in Arizona

Debt Forgiveness in Arizona Cancellation Taxes AZ

The “fiscal cliff” deal includes an extension of the Mortgage Debt Forgiveness Act. Debt forgiven as a result of a short sale or mortgage modification is ordinarily considered taxable income. AZ short sales made up a large portion of all residential sales in Arizona. Homeowners considering a short sale or mortgage modification should be aware that the extension expires at the end of the year, and there are no guarantees that the Act will be extended again.

Rest easy if you’re trying to short sell your house – you won’t face a massive tax bill as a result if you complete the sale in this year.

As part of the fiscal cliff deal, the Mortgage Debt Forgiveness Act has been extended until the end of the year.  Under normal circumstances, debt forgiven as a result of an AZ short sale or Arizona mortgage modification would count as income for tax purposes.  For instance, if somebody owes $250,000 on their Arizona mortgage and their lenders agrees to a $200,000 AZ short sale, $50,000 in debt is forgiven.  This would have been taxable without an extension of the law.

At the end of the day, AZ short sales are an important mechanism to clear negative equity from the Arizona housing market.  Although not totally pleasant, AZ short sales tend to have less negative impact than foreclosure (which is probably the most destructive real estate market tool).

Download document [here]. The provision of the bill extending debt relief through the end of this year is found under Title II – Individual Tax Extenders.  Under that heading, scroll to Section 202 – Extension of Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness.

Please feel free to contact us and we can provide you with additional AZ short sale information to guide you through the Home Selling process in AZ. We look forward to hearing from you and working with you soon!

Our best,
Carl Pepper, Realtor
info@MyOwnArizona.com
www.MyOwnArizona.com
Tucson: (520) 822-6575
Phoenix: (480) 382-9191

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