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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55315
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I owe 40k in property taxes on my primary residence, they will

Customer Question

I owe 40k in property taxes on my primary residence, they will appear on my credit report after 5 years of delinquency in February of 2012. I'm planning to short sale or go through foreclosure depending on the tax implications. My question is 2 fold.

1) Who is responsible for paying off the property taxes on a short sale, and or foreclosure - if it is the lender, (as I have been told) - can they then come after me for the unpaid property taxes after I no longer have ownership interest in the property?

2) During this process I will also (not including the property taxes above) hopefully be forgiven of $100k. (I owe $100k more than the current fair market price of the home). This is my primary (and only) residence, I have lived in it for 5 years and have paid both mortgages on time. Q: Will I have to declare bankruptcy to avoid being liable for the taxes on this Mortgage debt forgiveness?
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good afternoon...


1) Property taxes run with the land, not the person, so you will not be personally liable for the property taxes.


2) You will not owe any income tax on the mortgage forgiveness. Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions.



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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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