Mortgage Forgiveness Debt Relief Act
On December 3, the House of Representatives passed a bill 387 to 46 to extend expiring tax provisions for one year (until December 30, 2014). The Senate also approved the bill 76 to 16 on December 16 and subsequently the President signed the bill (now known as the "Tax Increase Prevention Act of 2014") into law on December 30. The bill includes a tax provision that allows homeowners that have mortgage debt from a short sale to not be required to pay taxes on the amount of debt forgiven. The bill applied retroactively to the 2014 tax year.
Along with the taxable debt forgiveness for short sales and foreclosures, the bill also provides homeowners the ability to deduct the cost of mortgage insurance premiums on their 2014 taxes. This includes FHA, VA, and Rural Housing Service loans.
The discussion in Congress might have lead to a two-year extension, but unfortunately both sides could not agree on equitable terms. This is unfortunate because the tax relief on debt forgiveness as well as the deduction for mortgage insurance premiums benefits struggling low and middle income families. But, staying positive, at least these benefits will extend to the 2014 tax year.
The original Mortgage Forgiveness Debt Relief Act and Debt Cancellation information can be found on the IRS website. The National Association of Realtors (NAR) and the U.S. Mortgage Insurers (USMI) have stated that they support and commend the bill, respectively.
All articles are written by a member of the Heekin Law staff with the intent of providing current and accurate information, but information changes over time. Please do not use this information in lieu of seeking assistance from an attorney. This article does not constitute an attorney-client relationship.