WHY CONGRESS MUST RENEW THE “MORTGAGE FORGIVENESS TAX RELIEF ACT” In 2007, in response to a critical failure in the home mortgage market, Congress created a temporary exception to this tax code rule solely for distressed homeowners — the Mortgage Forgiveness Debt Relief Act of 2007 — but that law expired last Dec. 31 and has not been renewed for principal reductions during 2014, whether they are obtained through loan modifications by lenders, short sales or foreclosures. Currently, under federal tax law, when homeowners receive reductions in their mortgage, the amount forgiven by the bank gets reported to the IRS and the owner is hit with taxes as if it were ordinary income. Hence the forgiveness provisions of the 2007 Act. This provision has previously helped millions of distressed American families by allowing tax relief for homeowners when lenders forgive some portion of the mortgage debt they owe. The National Housing Market is finally beginning to recover. However, there are still millions of homeowners unable to meet their mortgage obligations. In fact, estimates show that about 5.3 million homes are still under water. Additionally, there are still more than 1 million homes in the process of foreclosure. If “The Mortgage Forgiveness Tax Relief Act” is not extended, hundreds of thousands of American families who were forced to short-sell their home or received a much needed loan reduction from their lender will have to pay income tax on “phantom income.” Instead of cleaning out their offices and jockeying for better office space, the “Lame Duck” congress must act now to help the American homeowner and extend this important exemption Source URL: - http://bit.ly/29Dk2LC
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