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Tax_on_Foreclosure by georgetitan

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									Title:
Tax on Foreclosure


Word Count:
483


Summary:
The impact of the housing market and the tighter lending standards has put the homeowners into a dilemma.
Lending crisis continues to shake out, it has affected homeowners particularly those who have used creative
mortgages. Long-time homeowners who refinanced their properties based on increased value too could find
themselves in tax trouble with foreclosures.



Keywords:
foreclosure, tax



Article Body:
The impact of the housing market and the tighter lending standards has put the homeowners into a dilemma.
Lending crisis continues to shake out, it has affected homeowners particularly those who have used creative
mortgages. Long-time homeowners who refinanced their properties based on increased value too could find
themselves in tax trouble with foreclosures.


The increasing foreclosure rate in the country resulted from the collapse of the subprime loan market. These
Subprime loans were sold forcefully to gullible borrowers. Today the real value has suffered and equity has
taken a record beating. According to the recent data it exhibited that neighborhoods with home prices less
than $250,000 are taking the worse beating, on the other hand, higher-prized communities remain relatively
unscathed.


As debt cancelled by lenders is considered taxable income, taxpayers who lose their homes might be left
with a higher than expected tax liability. It is reported that there might be some legislative relief from D.C.


President George W. Bush announced his support for a proposed amendment to provide relief from
discharge of indebtedness income for taxpayers who lose their primary residences to foreclosure.


The President calls on congress to change a key housing provision of the Federal Tax Code so it does not
punish families who are forced to sell their homes for less than their mortgage is worth. The current tax law
counts cancelled mortgage debt on primary residences as taxable income. The President also proposes
temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.


Bush's proposals would make it easier for adjustable rate mortgage holders to refinance using the recourses
of the Federal Housing Administration, a Depression-era agency created to help low and moderate income
Americans to afford homes.


An estimated 60,000 homeowners are behind payments because their mortgages have reset. They can
refinance with FHA-insured loans, as they do not insure refinanced loans from borrowers who are currently
delinquent.


As part of the mortgage package, Bush said he would support legislation currently pending in Congress.
This could temporarily change tax law to let homeowners avoid paying taxes on forgiven debts in loans
restructured by financial institutions. He also urged the Congress to modernize and improve FHA so more
homeowners could qualify for mortgage insurance. This programme will only benefit those with good credit
who have lagged behind refinance for a Federal Housing Authority (FHA) secured loan.


This relief is proposed only to give homeowners a time-out from foreclosures. The scheme does not
guarantee recovery to all consumers and community organizations that have been urging for a six-month
foreclosure freeze. This scheme focuses more on rescue loans and the release of more funds for credit
counseling agencies. The freeze will only provide suffering homeowners time to get their bearings.


The government tries every way it can to control the rise in foreclosure rate. Bush's proposal is to help
delinquent borrowers avid foreclosures.




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