Will I have to pay taxes if I Short Sale my home?
Many homeowners and even many real estate agents believe that forgiven debt in a short sale is always taxable by the IRS. However, according to many CPAs we have spoken with and according to the tax attorney in the video below, it's usually not taxable so long as you have a good accountant who understands the details of tax law.
Even though the The Mortgage Forgiveness Debt Relief Act has expired, he explains that there are still several other common strategies that you can employ to avoid taxation in a short sale, which most accountants should already know about.
Obviously, everyone is different and so you should consult a CPA regarding your specific tax situation before entering into a short sale transaction or any real estate transaction whatsoever.