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Will I Owe Taxes on Cancelled Debt in a Short Sale?

The Mortgage Debt Relief Act of 2007 spared distressed borrowers from paying income tax on any cancelled mortgage debt for their principal residence.  Some situations in which this could occur might be a short sale, loan restructuring, foreclosure, or bankruptcy.

Although this relief was scheduled to expire on 12/31/09, it was extended shortly before the 2008 election to last through 2012.  

I’m glad to be the bearer of good news on this topic, but I’m “just” a real estate agent – not a CPA or tax expert.  Let me refer you to the IRS website for more information about cancellation of taxing on mortgage debt relief.

Related post:

Do You Qualify for a Short Sale on Your Crofton Home?

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