Mortgage Debt Relief Act Extended

Great news for distressed homeowners! On December 16, 2014 the United States Senate voted to extend the Mortgage Debt Forgiveness Act. A few weeks prior the House of Representatives also passed the extension of the Mortgage Debt Forgiveness Act. Now the bill is going to President Obama and it is expected that he will sign it. Homeowners who sold their home as a short sale in 2014 will receive a tax break!
The extension of this Act relates to any short sales conducted in 2014 and provides tax relief for mortgage debt forgiveness. This Act does not allow the IRS to tax distressed homeowners on the amount of forgiven debt when the consumer has sold their home through a short sale. For example, if Mr. Smith sales his home as a short sale and $100,000 of his debt is forgiven Mr. Smith will not pay taxes on that $100,000. It is estimated that extension of the Mortgage Debt Forgiveness Act will save distressed homeowners from paying taxes on more than $8 billion. Without the extension of this Act any amount that was forgiven as part of a short sale would count as income for the homeowner when filing their taxes for 2014.
According to RealtyTrac there were more than 170,000 homes sold as short sales in the first 3 quarters of 2014 and the average amount of debt forgiven as part of those short sales was approximately $75,000. This means that voting to extend the Mortgage Debit Forgiveness Act is helping hundreds of thousands of distressed homeowners.

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