The Mortgage Forgiveness Debt Relief Act was extended to December 31, 2013 by lawmakers. The extension means owner occupied homeowners now will be excused from paying taxes on forgiven mortgage debt through 2013. The law, established in 2007, was set to expire Dec. 31, 2012.
The extension will mean potentially tens of thousands of dollars in tax savings for many homeowners looking to work out a short sale or mortgage modification with their lender. This is great news to keep the momentum going on the Florida real estate market. Some industry officials feared no extension would hurt the housing recovery.
Under normal circumstances, debt forgiven as a result of a short sale or mortgage modification would count as income for tax purposes. This would have been taxable without an extension of the law.
Short sales are a very large part of the real estate market. This extension should give many homeowners an incentive to short sale rather than let their home go to foreclosure.