Mortgage Debt Forgiveness Act Extended
On January 2, 2013 Congress enacted the American Taxpayer Relief Act (ATRA) that included many changes to 2012 tax law. One of the tax reliefs that were set to expire on December 31, 2012 was the mortgage debt forgiveness on principle residences.
This act, which was passed in 2007, allows taxpayers to avoid paying income taxes for mortgage indebtedness that was forgiven on their home instead of paying income tax at regular ordinary rates.
To lessen the fear of a continued mortgage crises, Congress granted an extension of the Mortgage Forgiveness Debt Relief Act through the end of 2013.
If you were involved or considering a short sale on your principle residence but could not close before the end of 2012, you now have another twelve months to take advantage of the tax relief.
After the expiration of the act at the end of 2013, any mortgage debt forgiveness would be considered taxable income.
Please contact us if you are considering a short sale or debt restructuring.
Jesse T. Singer, CPA
Cowheard, Singer and Company, P.A.