Many have asked whether or not we believe the Mortgage Forgiveness Debt Relief Act of 2007 will be extended past its current expiration scheduled for the end of the year. As a reminder, the legislation ensures that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven.
The reason this act is important in today’s housing market is that, without the act, debt is reduced through mortgage modifications or short sales qualifies as income to the borrower and is taxable. If the legislation is not extended, then it would require homeowners to complete a short sale or modification prior to year’s end in order to avoid a tax consequence.
In February, DSNews reported:
“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.”
In today’s political environment, the passage of any budget proposal could be considered doubtful. However, both parties seem to be in agreement that this provision should be extended. We can only hope that it doesn’t fall victim to an election year.
What do I think? I don’t count, I don’t have a say on this but I know it will help a lot of people under water with their mortgages. Very informative, give us a call if you think you could use the incentives before it is too late. It might not be extended. Our professionals will help you with everything, cost you nothing and at the end you’ll get your life back. Call today. TradeMark Realty Group – Absolutely No Alternative! 570-901-1020 and ask for the short sale department.
Disclaimer: As with all tax issues, we strongly suggest you consult with your accountant to find out how this may impact you and your family.
Recent Comments
Venus 7 years ago
Thanks, it’s very informative
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LeAndra Shepherd 13 years ago
As a Realtor I speak with many homeowners who are clinging to these upside down mortgages – many feel a sincere duty or commitment to the obligation that they originally signed on to the loan for. Some feel the market will at some point either turn in their favor or the lenders will lay out some type of magical mortgage amnesty and save the day for all those upside down. Then there are those who may just be having a serious sense of denial until the reality of foreclosure hits them.
The mortgage crisis has created a very difficult situation for all of us. I for one wish I had the magic mortgage wand with the ability to make it all just go away so we can get back to a normal standard sale market in the land of home equity and revitalizing our properties.
Without the extension of the 2007 Mortgage Debt Relief Act many homeowners who modify, short sale or fore close after December 2012 will be faced with the serious tax consequences of having to pay tax on the difference between what is owed on the loan and what the bank claims as a loss. This will have some devastating effects on many people who were already struggling – especially those who may be in the last stretch of their earning years and looking towards retirement.
Being in the real estate field I have the misfortune of speaking with families who foreclosed or short sold their properties prior to the Debt Relief Act – the amount of taxes they owe has placed them in a situation of not only having to rebound from a tanked out economy, but also having to recover from the mounted tax debt.
We need to urge on our local elected Congress officials to insist that the Mortgage Tax Debt Relief Act be extended – and for how long? Honestly, unless there is an amnesty for all loans originated during the inflated market period…..these homes are still a ticking time bomb for homeowners.
The best thing we can do as Realtors is to educate within our farming area letting homeowners know that without the extension they these loans that were modified without a principal reductions will only keep in limbo without the benefit of possibly ever reaping any equity on their homes. consequences