On December 16, 2014, President Obama signed a bill that extended the Mortgage Forgiveness Debt Relief Act to cover any mortgage debt cancelled through year-end 2014. The Mortgage Forgiveness Debt Relief Act prevents homeowners who went through a short sale, foreclosure sale (Sheriff’s Sale) or principal reduction from being taxed on the amount of mortgage debt forgiven. For homeowners to qualify for this tax exemption in 2014, their sale or loss mitigation (workout) must close by December 31, 2014.
The Act has only been extended through 2014. Congress is expected to debate further extension of the Act as part of a larger tax package in 2015. In the meantime, mortgage debt forgiven by a lender in 2015 might count as taxable income.
If you have questions about your foreclosure, short sale or Sheriff’s sale, our network of Homeownership Advisors that specialize in Foreclosure Prevention would love to assist. You can connect with a Homeownership Advisor, here.