Congress has voted to extend the Mortgage Forgiveness Debt Act to 2017. Originally passed in 2007, the act protects underwater homeowners from incurring tax bills on the debt forgiven during a short sale.
**** This provides a tax exemption for homeowners for “income” resulting from debt forgiveness related to foreclosures, short sales and principal foregiveness of loans. ****When a lender FORGIVES a debt – it waives the deficiency in a short sale or elects not to sue for deficiency after foreclosure sale ****The debt is forgiven – where it may have been considered by the IRS to be ordinary income and taxable as such
JUST AN INTERESTING FACT – this was buried deep in the Tax Extenders provisions of the 2016 Appropriations Bill (H.R. 2029) quietly passed by Congress and signed by the president on Dec. 18, 2015 and was a very UNPUBLICIZED extension of the Mortgage Foregiveness and Debt Relief Act of 2007.
The Law Office of Beth Mann, P.C. 