Millions have underwater mortgages as a result of the real estate collapse. If your home value is 75% or less of your mortgage balance, you may have asked yourself if hanging on to the house is worth it. Like many people, you may have thought of getting a strategic default, even if you can still afford the mortgage payments. How bad could it be, right?

Well, before you make a decision, you should consider the ramifications of walking away from your mortgage. Voluntary foreclosure can damage your credit, raise your taxes and more.

* Credit scores – Walking away will impact your credit score. If you have stellar credit, your score will mostly likely fall over 100 points. If your credit is not so great, it won’t fall as far but you will still wind up in the same place – the bottom.

* Tax implications - Many people don’t realize that the IRS regards unpaid debt as income. This includes mortgages. However, due to temporary legislation, homeowners can get some relief from these tax obligations. If you default on your primary residence, according to the new legislation you may not have to pay income taxes on that amount if the debt was incurred between years 2007 and 2012. After that, taxes take effect again. The tax relief laws only apply to a primary residence and not to a second or vacation home, or to a rental property. You must still pay taxes on unpaid debt of over $1 million for single taxpayers and $2 million for married couples filing a joint return.

* Rental issues – If you think you can just rent for awhile after walking away, you might want to think again. Landlords do credit checks. If they see that you have walked away from a lender, leaving a large debt, they will certainly not think you’re a reliable renter.

* Limited employment options – If you’re looking for a new job, be aware that some employers often check credit reports on potential employees as part of the hiring process. You may be knocked out of the competition, especially if you are looking for work that requires handling or overseeing other people’s money. This is due to the fact that many employers see someone with poor credit as untrustworthy.

Your credit scores will improve over time, but the foreclosure will show up on your report for 7 years, although with each passing year the credit impact will lessen.

You may want to look into other ways to get out of a mortgage you can’t pay. You can only short sale your home if you can prove hardship, such as a job loss. Merely being underwater on your home is not enough.