If you thought a bank foreclosure ended the financial miseries associated with your former home, think again. You could soon be hearing from the IRS about taxes due in connection with the residence you no longer own.
By Kay Bell • Bankrate.com
You can walk away from the big house payment, but not from the potential tax implications," says John W. Roth, senior tax analyst at CCH in Riverwoods, Ill. "And if you couldn't afford the mortgage, you probably can't afford the taxes."
As the lending crisis continues to shake out, more homeowners, particularly those who used creative mortgages to buy their houses, could be in this predicament. Even long-time homeowners who refinanced their properties based on increased value when the real estate market was hot could find themselves in tax trouble if they lose their properties to the bank.
The issue is complicated by many factors. There are, of course, the financial problems that have led to the foreclosure process. Add to that the loan terms (some of which employed those creative mortgage products), the housing market in your area and, of course, federal tax laws, and you've got a recipe for financial disaster.
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