Historically, any discharge of indebtedness or other relief from debt is taxable as income under the Internal Revenue Code (IRC). Under the IRC, when a lender decides to forgive all or a portion of a borrower’s debt and accept less than the original amount owed, the forgiven amount is considered as income for the borrower and may be taxed.

However, the Mortgage Debt Forgiveness Relief Act of 2007 was enacted to provide relief to qualifying homeowners who would have otherwise suffered a tax consequence because of the forgiveness of mortgage debt.  The Mortgage Debt Forgiveness Act has opened the door for many additional amendments to help taxpayers exclude qualifying debt that has been forgiven from income and eliminate potential tax liabilities. Recently the Emergency Economic Stabilization Act of 2008 has extended the tax relief until 2012. The goal of such legislation is to allow the borrower and lender to work freely to find a common solution that is beneficial to the financial status of both parties.  

One of the ways you may qualify for these tax benefits is through a short sale of your home. 

In a short sale, the lender agrees to accept less than the total amount due under the mortgage.  Please note that not all owners or all properties will qualify for relief.   

Recent legislation has been enacted that provides for a new type of refinancing option, available for mortgages made after 2006. This new legislation applies only for owner occupied homes. Under these laws, a debtor provides information similar to that necessary for a short sale but instead of selling the property to a third party, a Federal Housing Administration (FHA) guaranteed loan at a fixed rate is available if the original lender is willing to write off all but 85% of the debtor’s outstanding obligations. This includes: principal, interest, late fees, prepayment penalties, and all other fees. These FHA backed loans became available beginning October, 2008, and carry a fee equal to 1.5% of the value of the house.  It is important to note that debtors who exercise this option must have lost 50-100% of the equity in the home, and may not participate in home equity loan programs.

If you have had a loan forgiven after 2007 or are interested in benefiting from recent legislation to exclude such debt from income, the tax attorneys at Bucci Law Offices can help you analyze the potential tax consequences of your real estate transaction as well as other options that may be more suitable to avoid future to tax problems.   Bucci Law Offices can be your tax advocate and fight for your rights!

How Can Bucci Law Offices Help?

Dealing with the IRS alone can be very intimidating, often times, resulting in nothing more than increased interest and penalties being assessed against you.  We can eliminate this stress for you.  You can stop answering harassing phone calls and receiving letters from the IRS.  Instead, you can have us, your trusted partner, deal with the IRS on your behalf and help you get the results you need.  The attorneys at Bucci Law Offices have extensive experience with the IRS and can navigate through their rules and regulations, while advising you of your best possible options for resolving your IRS problems.

Remember, IRS problems do not go away by themselves and usually require immediate attention.  You need to know your rights and understand your options.  At Bucci Law Offices, our tax attorneys can help you analyze and assess the options most suitable to resolving your tax problems. You need someone in your corner to protect your rights and interests – we can do just that.  Bucci Law Offices can be your tax advocate and fight for your rights!

Contact Bucci Law Offices today to get the help you need and deserve.  Each second you delay is costing you money!  How long can you afford to do nothing? Call Bucci Law Offices now at 954-764-4440 or 877-764-4440 to learn more about how we can help you with your tax resolution!