One of the most important aspects of the Fiscal Cliff resolution is the extension of the
“Mortgage Forgiveness Debt Relief Act”.
What does it mean: if you short sale your property e.g., sell for $300,000 and your mortgage balance is $450,000, prior to the adoption of this act the IRS viewed that $150,000 difference as taxable income. The act (Sec 108) extends the forgiveness of tax due on such short sales through to December 31, 2013. It is specifically stated as:
“Exclusion from gross income of discharge of qualified principal residence indebtedness”.
Also important: “Mortgage insurance premiums treated as qualified residence interest (Sec. 163(h))”. This is a big savings for those that incur the cost of private mortgage insurance. It can now be deducted the same as home mortgage interest.
Additional Savings: Deduction of state and local general sales taxes (Sec. 164(b)). I thought sure this was going away, but has been extended through 2013. Very important if buying large ticket items such as a car or business infrastructure during 2013.
Get the entire list of changes here.
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