The Mortgage Forgiveness Debt Relief Act and Debt Cancellation EXTENSION of 2007 SIGNED for 2013

     It’s signed, sealed, and now delivered..."READ ALL ABOUT IT!!!"  The “Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007” extension is now officially APPROVED.  The “fiscal cliff bill” passed by Congress in the late hours of Tuesday, January 1^st 2013 approved the extension for the Mortgage Forgiveness Debt Relief Act.  With a sigh of relief for many still considering a pre-foreclosure solution, such as a short sale, loan modification or deed-in-lieu of foreclosure, many Americans will continue to be exempted from taxation mortgage debt until the end of this year, Tuesday, December 31^st, 2013 at 11:59pm.

     For many the dark shroud of whether or not the Mortgage Debt Relief Act would be extended or not was solved in the 11^th hour to avoid the “fiscal cliff”.  Being a major topic of discussion for the past few months for many distressed homeowners it seems that some relief has finally come.  With many complaints from struggling homeowners, realtors, and government officials it seems like the voice of may have done some good.  Additionally the November submission of 42 Attorney Generals sending the US Senate and House of Representative the request for the extension may have help as well and to that I would like to give them some kudos for that.

    And for the Homeowner(s) that are not aware with the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007” here is a simple synopsis of what is has to offer.  Under the US Federal Tax Code, all types of forgiven mortgage debt is treated as income, however the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007” gives homeowners forgiveness for that income through a pre-foreclosure option.  But that only applies for up to $2 million, so it does have a cap.  The debt amount that is considered to be forgiven is what the homeowner owes on the mortgage/lien after the pay-off during the pre-foreclosure option and after a foreclosure.  (ex.: A homeowner mortgage/lien is for $150,000.00 and short sales it for $100,000.00, then the homeowner would be taxed on the difference of $50,000.00 as income.  This places them in a much higher tax bracket.) 

     There are many finer points in this act that needs to be addressed.  So be sure to contact a tax professional that is well versed with the pre-foreclosure tax laws to see what benefits you’ll get from a short sale or loan modification.  Moreover, here is a link for some further information: IRS - The Mortgage Forgiveness Debt Relief Act and Debt Cancellation