The Maryland Taxation of Forgiven Debt in Short Sales bill was signed by Mayor O’Malley on May 20, 2010.

This is great news because it PREVENTS the tax of the debt forgiven.

A few counties in Maryland — Anne Arundel, Prince George’s, and Montgomery had begun charging recordation and transfer taxes based on what was owed to the bank, NOT what the current transfer price was in a short sale situation.

This emergency bill, HB590/SB657 puts an end to this practice.

Now, if a seller in distress short sales their house, they will only have to pay recordation and transfer taxes on the price they are selling it for — not what they owe.