weather icon Clear

Short sellers should act before tax break expires

Q: I’ve heard that there’s some sort of tax deadline coming up that encourages people to sell their home before the end of this year if it’s a short sale. Can you tell me more about this?

– Jayne C., Las Vegas

A: I’m glad you asked this question since I think it’s important to spread the word about this situation. I know that many would-be home sellers here in Southern Nevada and nationwide have decided to sit on their properties to see what the housing market does and what banks may decide to do next.

But this delay game could cost them in the near future. I’ve been reminding homeowners facing a short sale that they may want to consider selling their home this year to take advantage of current tax laws that are due to expire at the end of the year.

On Dec. 31, the Mortgage Forgiveness Debt Relief Act of 2007 will expire, unless President Barack Obama and Congress act to extend it. This means that after Dec. 31, whatever amount of money the bank writes off in agreeing to sell a home as part of a short sale will become taxable income when the seller pays his or her federal income taxes.

This law also applies to debt reduced for borrowers who lose their home in a foreclosure or who benefit from a mortgage loan modification. Basically, if the current tax break is allowed to expire, it will be comparable to the borrower getting a big extra check at work for that tax year. This is obviously not a position that distressed homeowners want to be in, if they can avoid it.

This is a big factor here in Southern Nevada, where we’ve had one of the nation’s highest foreclosure rates in recent years and where short sales account for about 30 percent of all existing home sales. As most readers of this column know, a short sale occurs when a lender agrees to release its lien on a home so it can be sold for less than what the borrower owes on the mortgage. The borrower may still owe the extra amount, unless the lender agrees to forgive the difference.

Realtors have been encouraging government and industry leaders to streamline and simplify the short sale process, which can frustrate potential buyers and sellers as they hang on for what can often take several months waiting for banks to make a decision on an offer.

Realtors are also urging Congress and government leaders to extend this mortgage relief act. Of course, there’s no guarantee that this will happen.

As with all tax and legal issues, I always advise people to consult an accountant or an attorney to find out more about how such things may affect them. But, overall, I think people considering a short sale would be wise to get moving before the end of the year. For more information on the Mortgage Forgiveness Debt Relief, visit www.irs.gov.

Kolleen Kelley is the 2012 president of the Greater Las Vegas Association of Realtors and has worked in the real estate industry for more than 30 years. To ask her a question, email her at ask@glvar.org. For more information, visit www.lasvegasrealtor.com.

Don't miss the big stories. Like us on Facebook.
7 ways autocomplete can get smarter

Autocomplete is one of the best (or depending on how hastily you push ‘send’ – worst) things in the world. We rely on it so much that Google plans to let us autocomplete whole emails. Here are seven ways predictive input can improve. 1. Recognizing names from previous emails Jakub Kokoszka has a tough name to […]

Movie posters might soon be based on your clicks

You may have thought you left Blockbuster behind, but the basic way we browse movies hasn’t changed all that much. We peruse poster after poster, kind of like walking the aisles of a ‘90s-era video store. That one poster image, meant to appeal to as many people as possible, is often all we see before […]

What I’ll be covering at NAB 2018

The National Association of Broadcasters show kicks off this weekend in Las Vegas.  The show focuses on new and emerging technologies and trends in relation to the media and entertainment industries. As it’s not open to the public, I’ll be at the Las Vegas Convention Center on Saturday, Monday and Wednesday to share some of […]

EXECUTIVE TRAVEL: Forget Strip flash; some prefer lake’s panache

If you get called to a board meeting at Lake Las Vegas, you might want to bring your swimsuit. That’s the term Westin at Lake Las Vegas marketing director Matt Boland uses for upright paddleboard races, one of many team-building exercises offered regularly at the resort.

After $4,700 in live poker career winnings, James Romero, 27, wins nearly $2 million

It was a 15-year celebration of The World Poker Tour at Bellagio for the Five Diamond World Poker Classic. The largest field size in WPT Five Diamond’s history was created when 791 entries were tallied, and it was James Romero, 27, of Portland, Oregon, who won his first WPT title.

Auto electronics at SEMA and AAPEX: A brave new world

The Specialty Equipment Market Association celebrated its 50th annual SEMA show at Las Vegas Convention Center this month by showcasing a car culture of “do-it-yourself” garage mechanics who share a passion for customizing vehicles.