Short sale deficiency amount question

[ilzhoefer]

Hello:

If one has completed a SS, and is liable for the deficiency amount, how is that taxed? Is it taxed as income and ups your tax bracket for that year or do you owe that amount back?

Also, when a foreclosure is completed, is one held accountable for the outstanding amount of the loan?

Thanks in advance.

[Kozmo]

Depends on the situation and state.

Certain states allow for a deficient judgement and others dont with a foreclosure.

Talk To a tax advisor for the short sale tax questions but I believe if your held liable then I wouldn't understand why there would be a tax liability if you owe the money. If it was "forgiven" then sure. But even in that case the mortgage debt forgiveness relief act may apply.