As economic news continues to give some the willies, it is worth noting that yet another tax relief item is available this 2007 tax season with regards to homeowners. This time being financially insolvent is likely to help you enjoy tax relief.
For those facing foreclosure, the mortgage debt forgiveness tax relief provision is pretty worthless. This remains true even in the case of a short sale. But there is a different way to avoid paying income tax in the case of a short sale: prove your financial insolvency.
To see if you qualify, go to the IRS Web site and download a free copy of form 433F. This is a worksheet that will help you figure your net worth. If it is negative, you are financially insolvent and do not have to worry about paying income tax on a short sale.