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Jul.15

2:44 PM ET

Tuesday, 15 Jul 2008

Short Sales & Taxes

Posted By:Carmen Wong Ulrich

Topics:Personal Finance | Mortgages | Housing

If you saw me on the TODAY Show this morning (watch the video), you may have caught me in a slip (thank you Professor Cunningham of Cardozo Law for pointing out).

A short sale doesn't net you a tax "write off," a deduction, but it does allow you to avoid taxes on the difference.

Here's how it goes: In previous years, if you had to sell your home for less than your mortgage (say, $250,000 but your outstanding mortgage is $350,000), you'd be taxed on the difference (in this case $100,000) as 'income'. Thanks to the Mortgage Forgiveness Debt Relief Act of 2007, that is no longer the case. Your credit history will endure a big black mark, but at least at one of the most stressful moments in your life you wont' be hit by a $100,000 tax bill!

Questions? Comments? Tips? Use the form to e-mail Carmen

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