What Gay and Lesbian Homeowners Need to Know for Tax Season

Gay/Lesbian Homeowners and TaxesNot only did LGBT Americans lose an hour of sleep by setting clocks forward in March, but many of them are still losing sleep as they worry about looming state and federal tax filing deadlines. To take full advantage of any tax breaks and benefits that are available to LGBT real estate buyers, sellers, or property owners in 2011, there are some important issues worth considering.

One major rule that applies to some IRS tax filings this year has to do with homeowners who negotiated loan modifications or short sales or were foreclosed upon in 2010. Normally the IRS looks at any outstanding loan balances that were waived by the bank or mortgage company as ordinary income. If part of a loan was dismissed, for example, the borrower is usually still required to pay income taxes on that cancelled and forgiven amount. The unexpected notification can come as quite a terrible shock. Taxpayers may be struggling to keep their homes or have already lost them, and then they get a huge tax bill just when they were hoping to make ends meet and get back on their feet again.

Needless to say, this policy has been greeted with ferocious controversy. Many believe that it is quite unfair to force people to pay taxes on money they did not actually receive in cash that was connected to an overpriced loan in a declining housing market. The majority of members of Congress agree, and for that reason lawmakers in Washington created a unique emergency exemption covering distressed home mortgages.

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