Will Mortgage Debt Relief Act be Extended Beyond 2012?

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Mortgage and Lending

 

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

How long is this special relief in effect?

It applies to qualified principal residence indebtedness forgiven in calendar years 2007 through 2012.  However, Obama's 2013 budget proposal includes a request that the Act be extended. This would definitely be good news for anyone still on the fence about listing their home as a short sale. So, in turn, this would be good for agents scoping out prospective short sale listings as well.

The budget proposal includes an extension that would apply to any amounts forgiven prior to January 1, 2015. At that point, the government would reassess the market and determine whether another extension is appropriate. This would be the second extension of the original bill. And, given the current state of the real estate market, it may not be a bad thing for homeowners who are underwater to have more time to consider all of their options with respect to their mortgage debt.


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