Good news for consumers! Those homeowners who have their mortgages forgiven due to a loan modification or short sale will not have to report that forgiven loan as taxable income. Congress extended tax relief for homeowners who have mortgage debt canceled or forgiven because of financial hardship or a decline in housing values.
The extension of the Mortgage Debt Relief Act will help homeowners who were negatively impacted by the housing market crash and who have seen some relief through the national Mortgage Settlement avoid an unexpected tax bill at the end of the year.
Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.
For more information, visit Orlando Foreclosure Questions.
