HR 3648 Is it for you?
As more and more people are contemplating the possibility of foreclosure or a short sale on their homes, many feel "safe" that they may not owe taxes following the forgiveness of the debt by their lender(s). Be sure you do your homework, carefully. Hiring a short sale expert to help you negotiate the terms with your bank is important. Many terms are negotiable with the lender, and you MUST know what to ask for to protect yourself. Protect yourself from what you ask? From recourse, deficiency judgements or tax bills. Further, you must know what this Mortgage Debt Relief Act really means. It is NOT the cure-all and it is not even an option for all. It does not encompass all "mortgage debt," so be careful. Take very careful note as to who this Act will help, and/or who it will not. If you have refinanced your mortgage, have a second, a third or if this is an investment property - you likely do not fall under the protection of this act at all.
As we always say, enlist the counsel of an experienced attorney and for tax implications, get expert advice from an income tax professional (CPA).
Here is a White House press release about this Act for more information: Fact Sheet: Mortgage Forgiveness Debt Relief Act of 2007
Below is information provided by Wendy Cutrufelli, Certified Mortgage Planner in Walnut Creek (one of the best there is in the mortgage business).
__________
Mortgage Debt Relief Act will save some homeowners facing short-sales or foreclosures from paying federal taxes on the "forgiven" debt. There are very specific requirements:
- The mortgage is for the homeowners principal residence. The relief does not apply to any debt forgiveness for any vacation or investment home.
- Forgiveness is only for the "acquisition indebtedness" of the principal residence. Acquisition Indebtedness is defined as the debt used to acquire, construct or rehabilitate the home.
- No relief is available for cash-out mortgages whether the cash-out takes the form of a refinanced first mortgage, a second mortgage, a home equity line of credit or a similar arrangement.
- Exception: If the cash-out was specifically used to improve the home and the homeowner has adequate records to prove it.
Important note: This bill relieves these specific homeowner of their federal tax liability but does NOT relieve the homeowner of their state income tax liability.
Contact Wendy for any further questions:
Wendy Cutrufelli, CMPS, CMP
Certified Mortgage Planner
Direct: 877-27Wendy
(877-279-3639)
http://www.camortgageplan.com/
Providing mortgage strategies that safely create financial security and financial independence.
http://www.wendycutrufelli.com/
Call Antoinette Payne, broker to buy a foreclosure, bank owned or short sale home for sale. Call us for property marketing assistance for properties in distress in San Luis Obispo County.