President Obama signed into law the Mortgage Debt Forgiveness Act, which will grant tax relief to home owners who did short sales in 2014.
Any mortgage forgiveness in a short sale will not be counted as “phantom income” if the home owners’ properties are sold by banks for less than the amount of their mortgage. The law was due to expire at the end of the year. The House and Senate recently passed measures by wide margins in December to extend it.
The average short sale has a mortgage forgiveness of about $75,000.
The extension will only apply to short sales conducted in 2014. Any further extension of the short sale tax break will need to be addressed by the newly elected Congress, which convenes its new session in January.
The National Association of REALTORS® issued a call to action earlier this month, urging REALTORS® to submit letters to their Congressional representatives in support of extending the Mortgage Debt Forgiveness Act.
“NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said in a statement at the time. “REALTORS® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or canceled by a lender in a workout, or after their home was sold for less money than was owed.”
Source: “Short Sale Tax Break Signed Into Law,” HousingWire (Dec. 29, 2014)
