Homeowners Must Sell In December to Avoid Taxes on Short Sales

The question of tax considerations comes up frequently with respect to short sales. While our firm does not and cannot provide tax advice with respect to short sales, the attached article in the Tampa Bay Times weighs in on the subject. In summary, it suggests that borrowers who are looking to sell their primary residence as part of a short sale (and are seeking to have all or a portion of the deficiency waived in connection therewith) need to understand that, assuming no changes to the tax code, they will have until December 31, 2012, to complete a short sale without tax consequences on any deficiency that might have been waived or otherwise forgiven by their lenders.

In other words, assuming no changes to the current tax code, the amount that the lender forgives on a residential short sale will be taxable after December 31, 2012. Property owners who are considering a short sale of their primary residence should give due consideration to this potentially adverse tax change and when it is expected to come about.

For further information regarding the tax consequences associated with a short sale (in either 2012 or 2013), we strongly urge you to consult with a tax professional.

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