Will The Mortgage Forgiveness Act Be Extended?
The Mortgage Forgiveness Debt Relief Act of 2007 ensures that homeowners who received a principal reduction or other types of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven. This legislation is set to expire at the end of this year. There has been much speculation and commentary on whether or not the Mortgage Relief Act will be extended.
This act is important because without it, any debt incurred from mortgage modifications or short sales will qualify as income and therefore is taxable. If the Mortgage Relief Act isn’t extended, homeowners who are in danger of losing their homes will be forced to complete a short sale or mortgage modification before the end of the year in order to avoid huge tax consequences.
DSNews has this to say in February:
“Obama’s FY2013 budget proposal includes an extension of the Mortgage Forgiveness Debt Relief Act of 2007…In the Treasury’s Green Book, its summary explanation of the administration’s budget proposal, it calls for an extension of the tax break due to “the continued importance of facilitating home mortgage modifications…The administration is proposing an extension that would apply to any amounts forgiven before January 1, 2015.”
It is hard to say if the Mortgage Forgiveness Debt Relief Act of 2007 will be extended. It seems that the passage of any budget proposals these days are doubtful however, both parties seem to agree that the legislation should be extended.