If you are contemplating short selling your home but haven’t started the process yet, you may want to contact a San Diego short sale specialist in the very near future in order to save yourself thousands of dollars. The Mortgage Forgiveness Debt Relief Act is going to expire at the end of the year and there is no talk in Congress of extending the act.

The Mortgage Forgiveness Debt Relief Act was created in 2007 to to help out distressed homeowners by saving money on forgiven debt. If you are short selling your home, this act could save you a lot of money by making you exempt from paying taxes on the forgiven amount. Here’s an example of how it works. If you owed $230,000 on your home but sold it via a short sale for only $200,000, the forgiven amount ($30,000) is taxed. Your lender would send you a 1099 with the $30,000 listed; the IRS views this amount as taxable income. What the Mortgage Forgiveness Debt Relief Act allows is for you to be exempt from paying taxes on that $30,000 if you qualify; most homeowners do qualify, but we always recommend contacting a short sale specialist to be sure.

This act applies to homeowners that are selling their primary residences and does not apply to investment properties, second homes and business properties. There’s also a limit to the amount of forgiven debt that is exempt from being taxed. There are more stipulations to this act, so it’s best to contact a short sale specialist in the San Diego area for more information about it and to get the ball rolling on the short sale process. Don’t lose out on saving yourself thousands of dollars because you were hesitant to contact a short sale specialist. Get your short sale underway today so that you can take full advantage of this act before time runs out.