Financially strapped homeowners who sold their home this year in a short sale or received a loan modification that include a principal reduction appear likely to benefit from the same tax break that helped similarly distressed consumers in the past six years.
The U.S. Senate late Tuesday passed on a 76-16 vote a package of temporary tax breaks that includes an extension of the Mortgage Debt Forgiveness Act, but only until Dec. 31, enabling taxpayers to claim them on their 2014 returns.
The $42 billion tax extenders bill, which contains a wide range of tax breaks, was passed earlier this month by the U.S. House and now will head to President Obama, who is expected to sign it.
Originally passed in 2007, the mortgage debt tax break was designed to assist homeowners who either sold their home for less than they owed or who negotiated a principal writedown of their mortgage. Under normal circumstances, the amount forgiven would be considered income and could have significantly boosted taxes owed by consumers already having trouble paying their bills.
The last extension of the tax break expired Dec. 31, 2013. The housing industry has been lobbying all year for another extension.
If signed by Obama, it would benefit anyone who had mortgage debt forgiven this year.
The tax break expires at the end of December.
Unless Congress takes the measure up again next year, anyone who sells a home in a short sale on or after Jan. 1, 2015, would be expected to report the forgiven debt as income.
© 2014 the Chicago Tribune, Mary Ellen Podmolik. Distributed by Tribune Content Agency, LLC