No. If you can afford the payments, don’t do it.
I have read that some lenders are issuing 1099s (I think that’s the one)for the difference as income.
If I can get this correct. Say you bought your house for $200K had a loan of $175K but found yourself underwater now, and could only get $150K. the bank agrees to the short sale (they want to avoid foreclosure). When the deal is complete they give you a 1099 for $25K. (The 150 + 25 = loan amount.)
Also have read that not all banks are doing that form.
Most lenders are not reporting unpaid balances as debt forgiveness to the IRS. There are laws prohibiting that if you sell before the end of next year. In Cal they even have a state law so no state income tax.
Don’t believe some anonymous guy on the internet. Search the net for debt forgiveness on loan balance or talk to your tax preparer.
Yes, BUT, I think I heard an accounting type tell me that people under a certain income (or home price level) don’t have to pay the tax on that difference.
I was under the impression that it wasn’t at the discretion of the bank. I understood it’s IRS regs. Also, if one has a credit card balance forgiven, they likewise have to pay income tax on the forgiven amount.