Question:
I have been told that if I sell my house for less than what is owed, my mortgage company will issue me a 1099 for the difference, and I will have to pay taxes on that. Is that true?
Answer:
In 2007, President George Bush issued the Taxpayers Debt Relief Act, which states that the homeowner will NOT owe the IRS taxes from a short sale 1099.  (You will still receive the 1099 but with no federal tax implication.) This act is in effect until 2010 and will most likely be extended.  Therefore, there is no federal tax liability associated with a short sale at this time.  To obtain information regarding any state or local tax responsibility, please consult your accountant.
Question:
Will I be responsible for paying the difference back to my mortgage company? (Will my mortgage company issue a deficiency judgment?)

Answer:
Some mortgage companies will issue a deficiency judgment and expect the homeowner to pay back any amount that is owed to them after the sale; however, the amount is usually substantially less than the deficiency judgment that would be filed as a result of a foreclosure.  It pays to do a short sale instead.

For legal advice on possible obligations after a short sale or foreclosure, please consult your attorney.

TAKE ACTION TODAY to improve your position!