Many of us who are in real estate thought it wouldn’t happen, but in ablow to homeowners who are working their way through short sales, foreclosures or mortgage restructuring, Congress did not extend The Mortgage Debt Relief Act of 2007 before the end of 2013. It expired on December 31st and homeowners lost a huge tax benefit to help them regain their financial footing.
Generally, the amount of anycancelled debt is taxable as ordinary income. This includes the debt written off by lenders. To assist distressed homeowners during the worst of the housing crisis Congress made an exception to this for debt related to principal residences, with certain restrictions.
With the expiration of this Act, homeowners are left out in the cold and potentially with a big tax bill.
Don’t Be Caught Short
If you’re involved in a transaction related to your primary residence that results in debt relief, check with your accountant so that you know the tax consequences. Under certain circumstances (e.g., bankruptcy or insolvency) you may still be entitled to relief. Review the specifics on the IRS’ Mortgage Forgiveness Debt Relief information page.
We’ll keep you posted if Congress gets its act together on this and extends it. And you might want to ask your Congressperson why they let it expire…just a thought.
via:http://askconnyrealestate.com/2014/01/underwater-homeowner-tax-relief-history/
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