Jan

12

Short Sale Tax in 2013

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By Sam Martinez

(323) 250-3770 – A Short Sale in 2013 will not be harmed by additional tax consequences.  President Obama and Congress reached an agreement in the “fiscal cliff” negotiations, and the American Taxpayers Relief Act was signed into law on Wednesday, January 2nd, 2012.  The Mortgage Forgiveness Debt Relief Act is now extended for one year, which prevents homeowners from having an additional tax burden when performing a Short Sale.Short Sale Sign

However, individual states have their own tax laws that apply to a Short Sale.  For example, the previous state tax exemption that was provided by the State of California did lapse at the end of 2012.  This means that any mortgage debt that is forgiven by a lender in 2013 is now considered taxable state income.   In an effort to conform state law with federal law, the California Association of Realtors is sponsoring Senate Bill 30, so that California homeowners will continue to have a Short Sale as a more preferable option to a Foreclosure.

Upon the likely passage of SB 30, that was sponsored by Sen. Ron Calderon of Montebello, the measure will be effective on a retroactive basis to January 1st, 2013.   It will provide a short sale with one more year of tax exemption for mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification.  This includes any amount of negotiated principal reduction.

Sam C. Martinez is a Short Sale Specialist in Los Angeles, California.   He is a Real Estate Broker, Commentator, and an Advocate for Made in the USA.  He  can be reached at http://silverlakebroker.com

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Category: Short Sale, Short Sale Process, Short Sale Specialist, Short Sale vs Foreclosure

About the Author ()

Sam C. Martinez is a Real Estate Broker, Commentator, and Advocate for Made in the USA.

Comments (7)

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  1. Greg Holbert says:

    With how radically our tax code is changing, I’m glad they decided to throw the people trying to sell their homes a bone. Thanks for this great article! Look forward to seeing what you will post next.

  2. Glad to hear California is working to preserve short sales as a viable alternative to foreclosure. On the surface, taxing the debt forgiveness on a short sale may sound like a good way to raise tax revenue for states that are having financial problems, but pushing houses into foreclosure by taking away the benefit of short selling only hampers the real estate market and has a long-term negative impact on the states tax base.

  3. Mark Hide says:

    Great article. I would suggest that underwater sellers need to start their process now for short selling their homes. Some lenders still have not got their acts together and you to make sure you can close by 12/31/2013

  4. Dave Grbich says:

    It always helps to have someone that knows the changes and keeps up with them. You are the guys to call for Short sales in LA.

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