Duplex Foreclosures Taxable: For Now

said on January 16th, 2014 categorized under: Short Sales/Foreclosure

duplex foreclosure taxableAs the duplex foreclosure crisis wears on, one of the most important things we often forget is traditionally, the forgiveness of mortgage debt through a short sale or foreclosure is a taxable event.

The Mortgage Debt Relief Act of 2007 made forgiven mortgage debt tax-exempt. In order to qualify, the debt had to be on a principal residence, and the amount owed could not exceed $2 million.

On December 31, 2013, this tax exemption expired.

And to date, no extension has been passed.

On Tuesday, Congressmen Bill Foster (D-Illinois) introduced the Homeonwer’s Debt Relief Extension Act, which would extend the exemption for two more years.

To offset the extension, the bill calls for the repeal of a tax break for oil and gas companies.

Keep an eye on the bill, More importantly, if you’re facing losing your duplex or home to foreclosure, or the necessity of a short sale, be sure to consult your tax professional first so you’re fully informed of any tax consequences.