Mortgage Forgiveness Debt Relief Act

Mortgage Forgiveness Debt Relief Act of 2007 survives the fiscal cliff! This was set to expire December 31, 2012 and has now been extended through January 1, 2014

What this means for the homeowners that are experiencing financial difficulties in keeping their head above water with their mortgages is that they won’t have an additional burden of paying income on their forgiven debt.  When a home is sold through a short sale, and a portion of the mortgage is written off, normally the homeowner would have to claim that difference on their income tax as income.  Through the Mortgage Forgiveness Debt Relief Act you will have until January 1, 2014 to sell your home through sale or deed in lieu and not have to worry about paying income tax on the amount that was forgiven.

In order for homeowners to qualify for this Mortgage Forgiveness Debt Relief Act, the home must be your principal residence.