Good news, the Senate Finance Committee has extended the debt relief act retroactively so anyone who short sold their home in the last year will still receive the tax break. We just need the HOUSE and the SENATE to pass this bill.
The relief expired at the end of 2013 so anyone short selling their home in 2014 is going to be very happy if this extension goes through. What this means is that if you bought your home for $400k, and you owe $300k on it, but you can only sell it for $200k with current market values being what it is,…. the difference of $100k that you owe the bank would be considered a phantom profit! If the debt relief act doesn’t get extended, folks who made this phantom income will have to pay taxes on it.