The extension of the Mortgage Forgiveness Debt Relief Act is very important to the housing market and has major Income Tax implications for those who sell their home through the Short Sale process or lose their home to Foreclosure.These details are scrutinized in the overview, testimonials and review of lexington law for credit repair.
URGENT! The Mortgage Forgiveness Debt Relief Act. Please email this to your US Congressman and US Senators
Diane Feinstein
Barbara Boxer
Elton Gallegly
Support for S. 2250, H.R. 4336 and H.R. 4202
The struggling housing market has had a devastating on our nation’s families and communities. By the reports made by Northpoint Mortgage Lenders, the consensus is, while some housing markets are moving in the right direction, others will take years to fully recover from the loss in value caused by the Great Recession.
It’s important that Congress not add any roadblocks to a full and robust recovery. That’s why I’m asking you to support an immediate extension of “The Mortgage Forgiveness Debt Relief Act.”???Without action before the end of the year, millions of families who hold “distressed properties” could face a tax penalty if they try to modify their mortgage or seek a short sale through their lender. Even those in the worst situation facing foreclosure would find themselves forced to pay a “foreclosure tax” if Congress doesn’t act. This is because the amount of debt forgiven by the lender would be considered “phantom income” to the borrower even though they never receive any payment from the lender.
No taxpayer should be forced to pay tax on money they’ve already lost with cash they never received.
Today’s distressed sales and restructurings come not as a result of bad loans or over-leveraged families but from a struggling economy and falling home prices. We should be doing everything we can to expedite responsible loan modifications and short sales to allow the housing market and our economy to fully recover.
Legislation has been introduced in both the House and Senate. I urge you to ask your party leaders to work together to move a tax extenders package to the floor, before the end of the year, that includes this important provision.?
Ted, Isn’t it true that if your California home loan is a purchase money…you will be OK..even if the federal debt relief fact doesn’t get extended?
Thank you!
John
As far as I understand, even if there is a foreclosure, there are possible tax consequences. The relief is not just the deficiency issue, but there is a tax triggered on the sale for the amount forgiven. The last few years there has been a form Short Sellers fill out when filing taxes. They will get a 1099C from the bank for the amount forgiven and then needed to file a 982 with their return. That all goes away January 1st if the Federal government does not extend the Mortgage Forgiveness Debt Relied Act. The amount forgiven then will be taxed as ordinary income. Please seek the advise of a tax professional to verify anything above.