Currently there is a tax break for people who short sell their principal residence. Historically if you short sold your house, meaning you owe the bank more than your house is worth then the unpaid difference would be considered taxable income. In 2007 Congress changed the rule to allow the cancellation of debt income (COD) to be non taxable. This was a great benefit to many homeowners that were upside down on their mortgage and needed some relief so they could get out of a bad situation.
This benefit may becoming to an end. As of today Congress has not extended the COD relief. This will have a big impact on many homeowners that are still upside down on their mortgage and need to decided whether to walk away from the house or do what they can to make the payments.
If you are thinking about short selling your house then you may need to act fast unless Congress can decide in the next couple of weeks to extend the tax break. Stayed tuned to see what they will do. Give us a call for any end of the year tax planning needs.