Homeowners facing foreclosure and any shortfall of funds due to their lender were subject to tax by the Internal Revenue Service.
A person could lose their home in foreclosure and the lender could suffer of loss of say, $100,000. According to a tax law enacted in 1986, the lender was required to mail a 1099 to that ex-homeowner the dollar amount of loss suffered by the lender.
As an example:
A loss of $100,000 is reported on the foreclosed homeowner. That $100,000 would be added to their other W-2 and 1099 income. If our ex-home owner usually made $50,000, the $100,000 1099 would then increase their income to $150,000 and would be taxed at 50%. It is possible that the tax bill would be $75,000 for the tax year.
Essentially, someone in a very bad situation could go from the frying pan into the fire! The Bill H.R. 3648 relieves the homeowner from that tax liability for the owner-occupied foreclosed property.
I am several proven methods to keep homeowners in their homes, but this legislation brings a huge sigh of relief for many, many homeowners across the country.
Comments