Forgiveness of Mortgage Debt – Tax Implications
In a previous post, nearly two years ago, we discussed the extension of the federal law that provided a huge benefit to homeowners who received relief from a lender in the form of debt forgiveness. The Mortgage Forgiveness Debt Relief Act of 2007, extended several times, most recently through December 31, 2016, exempted such cancellation (among other exemptions, such as debt discharge in a bankruptcy) as taxable income. This extension, crucially, was not extended. While Congress could still extend it in the next session before the end of the year, it is not likely (and less likely that such an extension would be singed into law by the president).
If you are experiencing difficulties with your mortgage payments, are in foreclosure, or are considering a short sale, we highly recommend you contact a qualified attorney as soon as possible.