Homeowners Who Short Sale May Owe Federal Income Taxes in 2013

Homeowners who have a short sale or foreclosure after this year may owe federal income taxes. A new law effective January 1, 2013 states that the amount the lender forgives in either a short sale or foreclosure for a primary residence will be subject to federal income taxes. 

In order to avoid this tax liability homeowners should complete short sales in 2012 and the bank must officially sign off in writing by December 31, 2012 forgiving the loan.