Mortgage Debt Forgiveness Tax Break Extended
Mortgage Debt Forgiveness Tax break now covers any mortgage debt cancelled through year-end 2016.
On December 18, 2015, President Obama signed a bill that extended the mortgage debt forgiveness tax break – and now covers any mortgage debt cancelled through year-end 2016. That’s right… this extension not only retroactively covers mortgage debt forgiven in 2015, it covers mortgage-related debt forgiven through the end of 2016.
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.
Traditionally, any debt forgiven or ‘written-off’ is treated as income for tax purposes. For example, if a bank accepts a short sale of $100,000 on an outstanding mortgage of $120,000, that $20,000 difference would be considered income – and the seller would have to pay taxes on that ‘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.