KIRO Radio's Tom Kelly digs deep into the Puget Sound real estate market
Real Estate

Mortgage debt tax relief extended through 2013

A tax break for forgiven mortgage debt that was set to expire December 31 was extended by lawmakers when they dodged the fiscal cliff this week.

The tax break, which has been extended to the end of 2013, allows homeowners facing short sales, reduced loan principals, or foreclosures to avoid paying taxes on any debt still owed to the bank. Otherwise, the debt would have been taxed by the IRS as income.

The tax break first took effect in 2007.

Some homeowners had rushed to complete short sales before the end of the year out of fear that the tax break would not be extended.

In some states, short sales have sold for $100,000 less than what the homeowner owed. Hence, a home seller in the 25 percent tax bracket who completed a short sale would have been faced with a $25,000 tax bill if the extension had expired.

Top Stories

  • Council vs Columbus
    Seattle will consider a resolution to change Columbus Day to Indigenous Peoples' Day

  • Whatever it Takes
    Ricardo Lockette takes playing time with the Seahawks over pride

  • Moving Up
    How Bellevue will handle students who transfer from 'failing' schools
ATTENTION COMMENTERS: We've changed our comments, but want to keep you in the conversation.
Please login below with your Facebook, Twitter, Google+ or Disqus account. Existing MyNorthwest account holders will need to create a new Disqus account or use one of the social logins provided below. Thank you.
comments powered by Disqus
Listen to the show
Hear Real Estate Today on KIRO Radio
Join Tom Kelly every Sunday at 9am on KIRO Radio to talk Puget Sound real estate.

Sign up for breaking news e-mail alerts from MyNorthwest.com
In the community
Do you know an exceptional citizen who has impacted and inspired others?
KIRO Radio and WSECU would like to recognize six oustanding citizens this year. Nominate them to be recognized and to receive a $2,000 charitable grant.