San Jose, Saratoga, los Gatos, Campel Short Sale

San Jose, Saratoga, los Gatos, Campel Short Sale

Are you considering a short sale on your Saratoga home?   Are you wondering if you will owe IRS taxes on the forgiven debt?

Well, we are not licensed as CPA or Tax Planners, so we strongly recommend you explore the tax consequences of  your Saratoga Short Sale.   But suffice it to say that most the forgiven debt that gets reported as income to you and you could receive a 1099 from the lender who is approving your Short Sale.

However, most home owners are generally protected against a deficiency judgment  after a Short Sale.   But just like anything else, there are conditions.  The Mortgage Forgiveness Debt Relief Act of 2007 provides an exception from Federal taxation if  the Short Sale of your home meets the following conditions:

1) Primary Home:  If the Saratoga Short Sale home is used as a “qualified” principal residence then you might be exempt from income taxes on your Short Sale.  IRS Rules defines primary residence as the home where you must have lived there for the past 24 moths.

2) Home as Collateral:  Your loan for your Saratoga short sale home must be secured by the residence.  This means that loan will show up on the Property Profile with the lender as the beneficiary.

3) Income criteria:  Your income is capped at $1,000,000 for married couples filing separately and $2,000,000 for all others income categories.

4) Loan Term:  Loan must be discharged after January 1, 2007 and before January 1, 2013.

But the State income taxes on the forgiven debt is different in every State which is yet another reason for you to consult a CPA.  In fact, the odds are that in 2015 most states will need income taxes on the Short Sales since there are far fewer people affected by the foreclosure crisis.

Bottom line is that you are well advised to Dept of Housing and Urban Development  to discuss the tax implication of your Short Sale in the State where your property is located.

And Contact Us if you have any question on your Saratoga Short Sale.