It’s now December 2012, and if you’ve been watching or reading the news online recently. You’ve seen the term “Fiscal Cliff” used frequently because, tax cuts from the Bush Administration are due to expire as well as the Mortgage Debt Relief Act of 2007.
What is the Mortgage Debt Relief Act and why is it important? In the second part of this four part series we’re going to cover the specifics of MDRA and why distressed or underwater homeowners should take action in December 2012 before the Mortgage Debt Relief Act expires.
Important Fuel For Our Economy
Thanks to MDRA, homeowners in Orange County have been able to enjoy the benefits of Short Selling without having to worry about paying income tax on any of their mortgage debt that’s been forgiven.
What’s even better about the Mortgage Debt Relief Act of 2007 is that distressed or underwater homeowners are eligible for having up to $2 million dollars of their homes debt forgiven or up to $1 million dollars of their debt if a couple if married but they decided to file separately.
What Does It Mean To Have Debt Canceled?
The definition of cancellation of debt is simple. If a lender loans $10,000 to a borrower and the borrower is able to repay $2,000 on the loan but they are unable to repay the remaining $8,000, the lender may choose to cancel the remaining balance on that debt and they typically will file a 1099-C Cancellation of Debt form with the IRS because, that debt will be seen as income.
With MDRA, any homeowner in the United States has a huge benefit because, they can walk away from the possibility of paying thousands of dollars in taxes to the IRS but this benefit won’t last much longer because, the Mortgage Debt Relief Act will be expired after 12/31/12.
To learn more about the benefits of MDRA and get started with short selling your home, contact the experienced team of Orange County Real Estate Agents at Fred Sed & Associates today by calling (949) 272-0125.