Sacramento Short Sale Sellers: Cancellation of Debt Forgiveness has been EXTENDED another year!

Well, ding dong, hallelujah, oh yeah, yahoo, and boom! Not only does it seem that the United States won't tumble over the "Fiscal Cliff", but federal lawmakers have extended some very important provisions for Sacramento homeowners through the end of 2013.

I'll start with what I think is the most important one first -- this affects short sale sellers.

A few weeks ago, I was quoted in a Sacramento Business Journal article about the the need for an extension of the Cancellation of Debt Forgiveness for short sales. The existing legislation was in place through January 1, 2013 (yesterday). This provision basically cancels the income tax on the "forgiven" debt in a short sale. So over-simplified -- if you owe $300,000 on your home, and short sale it for $200,000 - you have been "forgiven" $100,000 in debt. The IRS traditionally views this sort of forgiven debt as income, and as such the homeowner would have to pay income tax on this $100,000. Thankfully, the US House of Representatives and the Senate extended this another year until January 1, 2014. Short sale sellers -- you still need to speak to your trusted tax professional to make sure you are protected by this legislation. While it applies to most homeowners, it does not apply to everyone! For example, one of the provisions is that the property must be owner-occupied primary residence in order to qualify for cancellation of debt forgiveness. Again, talk to your CPA.

All in all though, this is a huge break for Sacramento short sale sellers. I have short sale listings that did not close in 2012...so those sellers were anxiously awaiting for this to be extended. I also have been speaking with many potential short sale sellers who were waiting to list their homes until they knew if the cancellation of debt forgiveness would be extended. If you have questions about listing your home as a short sale in the Sacramento area, I am happy to answer your questions and speak with you in more detail. Feel free to call (916-342-1372) or email me.

The other items that were extended via the "Fiscal Cliff" legislation -- mortgage insurance premiums are still tax deductible for taxpayers making under $110,000. This was retroactivated for 2012 and extended through 2013. Also, a 10% tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012.

So good things for 2012 and 2013...it's going to be a great year!