To all of those short sellers in 2015 who were forced to sweat out the long summer wondering if Congress would cut them a break, the answer is at long last here. In late December of 2015, Congress passed the long awaited budget deal that included a number of tax breaks for big business, and even a couple for the homeowners.

First, whether or not this tax credit is applicable to you is dependent upon a number of factors. You MUST have a sincere conversation with your tax professional to find out if this can be used in your situation.

Generally, when you participate in a short sale transaction, and the lender agrees not to sue you when it is done, you will have some amount of your mortgage forgiven. This forgiven portion is reported to you, and the IRS, on Form 1099-C. The amount reported is taxable income.

While you might be able to make this taxable income go away through bankruptcy, insolvency, or simple basis adjustments, many homeowners have been using the Mortgage Forgiveness Debt Relief Act since 2007 to alleviate the burden. General qualifications include: (1) the home must have been your primary residence, (2) the amount of forgiven debt (cumulative) cannot exceed $2 million, and (3) the forgiven money must have been used to buy, build, or improve the home.

With the passage of this credit, all contracts for home sales in 2015, 2016, and sales in 2017 where the contract is entered into prior to December 31, 2016, will potentially be eligible for this exclusion from income. Great news.

Follow this link to read the text – Edmunds Law is not responsible for the boredom this may cause. http://docs.house.gov/billsthisweek/20151214/121515.250_xml.pdf