Mortgage Forgiveness Debt Relief Act Extended to January 1, 2014!

Tuesday, January 29

?As we inched closer to the end of 2012, many taxpayers anxiously awaited the decision from Congress on the American Taxpayer Relief Act of 2012, recently referred to as the??Fiscal Cliff??bill.?? An important part of the American Taxpayer Relief Act of 2012 included the Mortgage Forgiveness Debt Relief Act that was implemented in 2007 in response to the housing crises.? This Act provided tax relief for homeowners who were granted mortgage debt forgiveness because of a loan modification, short sale or foreclosure on their primary residence.

The Act was due to expire on January 1, 2013; however, Congress did come through and passed a one-year extension.? Therefore, many homeowners and real estate professionals were able to breathe a little easier and sleep a little better knowing the Act was extended through January 1, 2014.? Had the Act not been extended, hundreds of thousands of struggling homeowners currently in a workout solution would have been further crippled by a large tax liability.? The extension of this act ensures homeowners who receive principal reductions from loan modifications or other forms of debt forgiveness through a short sale or foreclosure on their primary residence will not have to pay taxes on the amount forgiven.? Under this Act, up to $2 million in debt elimination can be tax-free, but the debt forgiveness must be on the homeowner?s qualified principal residence.

Typically, when a lender forgives a debt, the amount forgiven is considered taxable income.?? For example, if you owe a debt to someone and that person cancels or forgives that debt, the canceled amount of the debt may be taxable.? However, the Mortgage Forgiveness Debt Relief Act was implemented specifically to protect homeowners from cancelled mortgage debt if the forgiven debt was on their qualified principal residence.? Only cancelled debt that was used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies under the Mortgage Forgiveness Debt Relief Act.? Second homes and investment properties are not included in this act.

The National Association of Realtors (NAR) worked long and hard over the past several months urging their Realtor members to ask lawmakers to extend this Act for another year.? The NAR stated that ?more than a quarter of all real estate transactions today involve distressed properties and these homeowners should not be forced to pay a tax on money they have already lost with cash they never received.??? Their hard work paid off!

Without the protection of the Mortgage Debt Relief Act, there is no motivation for homeowners to consider an alternative workout solution.? This would leave many homeowners to choose to walk away from their homes, which would force banks to foreclosure.? The housing crisis is just beginning to recover.? Had the Mortgage Forgiveness Debt Relief Act not been extended, it surely would have been detrimental to the housing recovery.

Source: http://www.biggerpockets.com/blogs/2849/blog_posts/26068-mortgage-forgiveness-debt-relief-act-extended-to-january-1-2014

Yom Kippur 2012 Aaron Paul mumford and sons packers Dancing With The Stars All Stars Joseph Gordon-Levitt space shuttle