Realtor group pushes to extend loan cancellation tax relief

The nation’s largest trade organization has sent a message to its million-plus members this weekend, urging them to support an extension of tax relief on mortgage forgiveness.

Under federal law, cancelled debt is generally considered taxable income. Since 2007, however, the Mortgage Forgiveness Debt Relief Act has exempted homeowners from paying taxes on the amount of money their mortgage lender forgives as a result of a loan modification, short sale, or foreclosure. The act is due to expire at the end of the year, but the bill would extend the relief through 2014.

“Over a quarter of all transactions still involve distressed properties. That is why you must take action now,” noted the message the National Association of Realtors Association sent to its members. “Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received.”

The organization asked its members to contact their elected representatives and tell them to complete their “unfinished business” after the election. Legislation aimed at extending the act has been introduced in both houses of Congress with bipartisan support in all cases. Senate Bill 2250 has 19 co-sponsors and awaits action in the Finance Committee.

In the House Committee on Ways and Means, House Resolutions 4202 and 4336 are identical versions of the Senate legislation, and have 47 and 34 co-sponsors, respectively.