If you are thinking about doing a short sale but are hesitant to get the process started, you need to reach out to a Las Vegas short sale realtor as soon as possible. The sooner you take action the better if you want to save thousands of dollars on taxable income. Typically when you short sale your home, you receive a 1099 for the forgiven amount because it’s seen as taxable income. When you file your taxes the following year, the IRS will tax you on this amount. For example, if you owe $100,000 on your home but short sale it for $75,000 the IRS treats the difference ($25,000) as income and will tax it the following year.

Currently, however, the Mortgage Forgiveness Debt Relief Act makes homeowners that short sale their homes exempt from paying taxes on the forgiven amount; taking the previous example into consideration, that $25,000 of taxable income would be exempt from being taxed. The Mortgage Forgiveness Debt Relief Act was signed into law in 2007 and is set to expire at the end of 2012. There has been no talk of extending the act, so if you are even thinking about doing a short sale it’s important to contact your short sale realtor to find out more information on short selling your home and if it’s the right choice for you. For exact details on the act and to find out if you qualify, you should contact your Las Vegas short sale realtor, but here’s some basic information about the act. Debt forgiven on second homes, rental properties and business properties do not qualify for the tax relief and there is a monetary limit to the amount that isn’t taxed.

Most people do qualify for this act, but if you’re going to short sell your home, it’s best you get the ball rolling and contact a short sale realtor so you can take advantage of the Mortgage Forgiveness Debt Relief Act before it expires.