The Mortgage Forgiveness Debt Relief Act 2007 is due to expire by the end of the year. The purpose of the act is to give relief to those homeowners who closed with a short sale or their home was foreclosed on, from paying taxes on the portion of their mortgage that is forgiven. Example: you owe $140,000 on your home, and you short sale for $100,000, the IRS could tax you on the $40,000.
Many sellers are feeling the stress as the days count down, and are urging their realtors to do what is necessary to get to the closing table before the end of the year. It will probably mimic June 30, 2010 when the homeowner’s tax credit was do to expired. Seller, buyers, and real estate agents found themselves in attorney’s offices until 9, 10, and 11:00 that night, closing. They did not want to lose out in case Congress did not extend the bill.
Some Congressman feel the extension will not happen, while others agree the act is a good policy and they will get it done. Will they have the sellers, buyers and their agents sitting on pins and needles again, waiting for it to get done? Will Congress make changes to the act, or renew it in its present form?
If Congress does not extend the Mortgage Forgiveness Debt Relief Act , there are other options open to borrowers who do a short sale or have their property foreclosed on. Those borrowers should check with an attorney or tax specialists to learn exactly what is available to them.