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Will 'fiscal cliff' legislation affect your home sale?

Since 2007, federal officials have given tax breaks to homeowners who have mortgage debts forgiven. Prior to that action, any debt forgiven during foreclosure, short sales or refinancing were taxable in the eyes of the government. Thankfully, distressed homeowners in Charleston looking to shed debt will now be able to enjoy that tax break until 2014.

Along with all the political hoopla raised by negotiations to avoid the "fiscal cliff," lawmakers also saw it necessary to authorize the Mortgage Forgiveness Debt Relief Act for one more year. This is likely to help those who are looking to sell their home on the market in order to avert foreclosure.

Another residential real estate provision in the highly-publicized legislation will allow tax filers earning $110,000 or less to deduct the cost of mortgage insurance premiums. This insurance provides payment to mortgage lenders in the event that the homeowner defaults on payments.

As this news shows, the landscape of real estate law is changing. If legislators fail to renew the tax breaks in the future, proceeding with a short sale or refinancing may become less feasible for homeowners. The hope is that unexpected changes in federal law will not catch homeowners off guard when they are trying to improve their financial position.

As the job market recovers slowly, many homeowners will continue to struggle to keep up on their mortgage payments. In this scenario, they will likely benefit from knowing their options to avoid the financial consequences of home foreclosure. By becoming informed, financially-distressed South Carolina residents can determine how to best move forward and take appropriate action.

Source: The Post and Courier, "Real estate affected by 'fiscal cliff' deal," Tyrone Richardson, Jan. 7, 2013

  • Our firm has experience helping South Carolina families through the details of residential real estate transactions, whether they are under financial distress or not. To find out more, please check out our Charleston real estate page.

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