The new stimulus program for homeowners (The Homeowner Affordability and Stability Plan) was announced last week by the Obama administration. The program includes a change regarding taxes that may be owed by sellers who sell their homes through the short sale process. Last week, in my blog Short Sale Advantages for Buyers and Sellers, I told you that possible tax consequences could apply for sellers who sell their homes through a bank approved short sale. This is no longer true in certain circumstances.
Before the announcement last week, a lender could report the difference in the amount actually received by the lender at the time of closing and the balance owed as income to you, which was then reported to the IRS as income. Lenders will no longer exercise this option if:
1. The property is your primary residence.
2. The property is a purchase money loan.
If you have refinanced your property, your loan is no longer considered a purchase money loan. In this circumstance, you will want to consult with a qualified professional financial or tax adviser. In my next post, I will let you know why Short Sales may be easier to arrange due to the Homeowner Affordability and Stability Plan.
