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Another Tax Bill Extension Debate

February 29th

Another tax bill is set to expire at the end of this year, which could lead to steep consequences for homeowners suffering mortgage debt troubles. The Mortgage Forgiveness Debt Relief Act of 2007 has helped homeowners in debt with their mortgage avoid tax liability over any restructured or forgiven deficiency balances. If the bill isn’t extended before the end of the year, homeowners facing foreclosure could also end up with a steep tax debt bill.

Forgiving Debts

Prior to the 2007 tax bill, homeowners who sold their home through a short sale or avoided foreclosure through a deed in lieu were held liable for paying taxes on any amount of forgiven debt. Any amount of mortgage debt that was forgiven or waived through a short sale or other mortgage debt solution was to be claimed as income according to the IRS. Since the bill has been in place homeowners have been able to avoid liability on nearly $2 million worth of forgiven debts.

Critics of the bill say the $2 million savings over the last several years is much needed revenue for helping to boost the economy. Those in favor of renewing the tax bill suggest the continued financial relief the bill will provide already struggling Americans will help the housing market recovery efforts. The current issue seems to be whether taking from one source to help another debt problem is really worth it in the end.

 

 

 
 
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