Long Island NY Short Sellers Get Last Minute Tax Break

Long Island NY short sellers who completed short sales during 2014 and had mortgage debt cancelled, got a huge 11th-hour tax break when the Senate extended the Mortgage Debt Forgiveness Act.

The average Long Island NY short sellers had a mortgage balance one and a half times higher than the market value of the house.

Long Island NY short sellers got a last minute tax break when the Senate extended the Mortgage Debt Forgiveness Act

Big Break for Long Island NY Short Sellers

Normally, the Internal Revenue Service treats forgiven debt as ordinary income going to the borrower, taxable at regular rates.

But under an exception for forgiven mortgage that took effect in 2007, qualified borrowers that saw their debt cancelled by a lender as part of a short sale, loan modification or foreclosure do not have to pay taxes on the wiped out debt. Lawmakers averted the exemption's expiration on December 31, 2014.

In a short sale, the homeowner agrees to sell the property, typically for a price well below what is owed to the bank. The difference between the sale price and the total amount owed can be forgiven by the lender.

Those Long Island NY short sellers who fall under the tax break under the Mortgage Forgiveness Debt Relief Act should receive Form 1099C (Cancellation of Debt) from their lender, if the amount of cancelled debt was more than $600.

Following the passage of the extenders bill, the IRS said that it anticipates opening the 2015 filing season as scheduled this month. The IRS will begin accepting tax returns electronically on January 20th. Paper tax returns will begin processing at the same time.

Get more information about Taxes and how Long Island NY short sellers may be affected in our section on Taxes to your right under Long Island NY Real Estate Categories.

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How Much Do You Know About Taxes?

As we turn the calendar on yet another year, it's time to start thinking about income taxes once again. How much do you know about taxes? Take this pop quiz and see if you do as well as the guy interviewed on the street in Times Square…

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We'll have more tips for you when it comes to taxes as we move closer and closer to that dreaded date of April 15th. But we have more tips for you at the Taxes link to your right under Long Island NY Real Estate Categories.
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And don't forget, we also post tips daily on Twitter and Facebook, sometimes pertaining to taxes. Find us there as well.
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Should Mortgage Debt Forgiveness Relief Act Be Extended?

Until the Mortgage Debt Forgiveness relief act was created in 2007, a person who short sold his home had to pay the IRS income tax and the mortgage debt forgiven in a short sale or mortgage term work out on his home. Clearly that made short selling and certain modifications impossible for many.

If distressed homeowners had to pay tax on the phantom income from mortgage debt forgiveness, many may have no choice but to go into foreclosure.

The Mortgage Debt Forgiveness act was created so that homeowners and banks and affected communities could utilize alternatives and avoid the negative impact of a foreclosure. But congress allowed the act to expire at the end of 2013…

The address again to email your questions or responses to is: mailto:asktheexpert@shariolefson.com

Check out our other articles and tips on taxes that affect Long Island NY homeowners by clicking on the Taxes link to your right under Long Island NY Real Estate Categories.

Deducting Mortgage Points on Your Tax Return

If you bought a home or refinanced your home in 2013, mortgage points you paid on the new loan are tax deductible. But depending on whether you purchased a home last year, or simply refinanced the one you already had, when you can deduct the mortgage points varies, as explained in this brief video…

Check out our other articles and tips pertaining to Mortgage points and mortgages in general by clicking on the Long Island NY Mortgage Info link to your right under Long Island NY Real Estate Categories.

We’ll keep you informed on any breaking news that might affect your Taxes right here at our website. For daily updates on real estate, mortgages, and tax moves and information that pertains to owning a home, Follow us on Twitter, and Find us on Facebook.

Long Island NY Real Estate News – November 2013

Long Island NY Real Estate News - November 2013

In our Long Island NY Real Estate News for November 2013:

No Mortgage Limit Changes Before Spring

Housing Inventory Fell In September

IRS Delays Start of Tax Filing Season (Again)

 

No Mortgage Limit Changes Before Spring

No Mortgage Limit Changes Before SpringMortgage lenders will get at least six months' notice before the government reduces the limit on the size of loans that taxpayer-owned Fannie Mae and Freddie Mac can back.

The Federal Housing Finance Agency, which has already said it was considering lowering the cap to wean the housing finance system off its dependence on the government, said any change would be phased in to avoid economic disruptions.

The housing finance industry had expected officials to lower the limits on Fannie Mae and Freddie Mac-backed loans on January 1, 2014. While it will get more time to prepare for any changes, a decision on whether to lower the limits, and by how much, would still be made later this month (November).

Currently, Fannie and Freddie cannot back loans of more than $417,000 in most markets, although the cap ranges as high as $625,500 in some pricier areas – and up to $721,050 in Hawaii.

Lowering the caps, which were raised in 2008 to help keep the mortgage market liquid during the financial crisis, could make it harder for Americans to obtain home loans and drive up mortgage costs, unless the private market steps in to fill the void.

The two firms do not directly make loans. They purchase mortgages from lenders, which they either keep on their books or bundle into securities that they offer to investors with a guarantee. Those investors pay Fannie and Freddie a "guarantee fee" when they buy the securities.

Some in the industry and lawmakers have tried to challenge the FHFA's legal authority to reduce the loan limits. In addition, a bipartisan group of lawmakers in the House of Representatives have called on the agency to drop its plans to change them altogether. We'll keep you posted on any changes, whatever they may be, right here at this website. Stay tuned!

 

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Housing Inventory Fell in September

Housing Inventory Fell in SeptemberThe number of homes listed for sale dropped slightly in September but a growing number of housing markets are witnessing higher levels of for-sale inventory compared with one year ago.

Nationwide, there were 1.94 million homes listed for sale in September, down by 1.7% from August but still the third highest level this year, according to a report from Realtor.com. Listings were down by 2% from one year earlier, but nine of the top 30 metro areas saw year-over-year increases in the number of homes for sale.

The housing market has seen brisk sales through the third quarter of this year, but there are signs that severe inventory crunches from earlier this year are slowly beginning to ease as rising prices give more sellers the incentive to test the market.

Home listings tend to slow in September as the school year begins, and the drop in listings last month was lower than normal.

The National Association of Realtors estimated recently that housing inventory stood at 2.21 million units in September, which was unchanged from August but up by 1.8% from last year's levels. That marks the first time in more than 2 and 1/2 years that the Realtors group has reported year-over-year gains in unsold home inventories.

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IRS Delays Start of Tax-Filing Season (Again)

IRS Delays Start of Tax-Filing Season (Again)The IRS announced recently that it will delay the start of tax-filing season by up to two weeks because of the government shutdown. However, taxpayers will still be responsible for turning in their 2013 returns by April 15. (Did you really expect a delay there too?)

This will be the second year that the IRS has delayed accepting tax returns due to legislative matters. Just after Jan. 1 this year, Congress approved a fiscal deal that adjusted tax rates and caused the IRS to push the start of tax-filing season from January 22nd to January 30th. Some taxpayers even had to wait until February or March to file.

The IRS says it will begin accepting tax returns between January 28th and February 4th. The agency plans to announce in December a final date for when the filing season will officially kick off. We'll update you here when that final date is announced.