Congress did troubled homeowners a big favor in 2007 when it allowed them to exclude from taxable income any mortgage debt written off by their lenders in a loan modification or short sale (selling the home for less than the mortgage balance, with the lender agreeing to take the loss). But the exclusion expires at year-end, unless Congress extends it. If you're headed for a short sale and don't want to risk losing Uncle Sam's generosity, it's best to get started.
SEE OUR SPECIAL REPORT: Buying and Selling a Home in 2012
RealtyTrac, a real estate data firm, expects a record number of such sales this year, as lenders and loan servicers, who lose less money on short sales than on foreclosures, step up approvals. But short sales still take an average of four months to close. Speed up the process by gathering documents—pay stubs, bank statements, tax returns and a letter explaining why the amount you owe should be adjusted—in advance, says Scott Fuller, a San Francisco real estate agent who specializes in short sales. Hire a specialist to list your home.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In January, two of Fuller’s clients, Lauren Predmore and Jason Webb, closed on the short sale of their home in pricey Walnut Creek, Cal. Webb had purchased the half-acre property in 2007. His loans totaled $650,000, but the bank agreed to accept the $390,000 proceeds of the sale as payment in full. The bank's roughly quarter-million-dollar loss still haunts him. But at least he won't be taxed on it.
-
Five Surprising GOP Senate Bill Tax Changes to KnowTax Policy Senate Republicans released proposed tax changes for Trump’s ‘one big, beautiful bill.” Some provisions are already stirring debate.
-
Senate Seeks $6,000 'Bonus' Tax Deduction for Those Age 65 and OlderTax Reform Under Trump’s ‘big bill,’ the Senate Finance Committee has proposed a larger bonus tax deduction for older adults than the House. Will it pass?
-
Living Abroad as an American? Don’t Miss These Tax Breaks in 2025International Tax U.S. expats can reduce their tax burden by taking advantage of a handful of tax credits and deductions.
-
Summer Backyard Ideas With Added Tax Benefits for 2025Tax Tips Find out how these summer 2025 home projects can help you save on taxes next year.
-
Why Your California Utility Bill Could Increase Under Trump's Tax PlanState Tax Energy bills in the Golden State may shock you if Republican lawmakers in Congress remove certain energy tax credits through Trump's 'big, beautiful bill.'
-
Property Tax Relief Bill in Texas: What to Know for 2025Property Tax Texas residents could get major relief from property taxes in 2025. Here's a breakdown of the tax cuts.
-
Homeschoolers Could Soon Save on Expenses With 529 PlansSavings Accounts A new House GOP bill could change how you save for your child's homeschool education. Find out how.
-
Ohio Announces Two-Week Sales Tax Holiday Amid Tariffs, High PricesState Tax Ohioans won't want to miss out on savings as pressure from tariffs spikes prices.
