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Mortgage debt tax relief extended through 2013

January 7, 2013 @ 8:26 am

A tax break for forgiven mortgage debt that was set to expire December 31 was extended by lawmakers when they dodged the fiscal cliff this week.

The tax break, which has been extended to the end of 2013, allows homeowners facing short sales, reduced loan principals, or foreclosures to avoid paying taxes on any debt still owed to the bank. Otherwise, the debt would have been taxed by the IRS as income.

The tax break first took effect in 2007.

Some homeowners had rushed to complete short sales before the end of the year out of fear that the tax break would not be extended.

In some states, short sales have sold for $100,000 less than what the homeowner owed. Hence, a home seller in the 25 percent tax bracket who completed a short sale would have been faced with a $25,000 tax bill if the extension had expired.

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  • Snout wrote...
    So a break on taxes helps
    January 7, 2013 11:37 pm
    but we need to stick it to income earners?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • dori monson fan wrote...
    how can an investment loss be considered income?
    January 8, 2013 10:52 am
    if you buy $250,000 of facebook stock and it drops in value to $150,000 did you just make $100k? of course not. how is an investment in real estate any different?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }