Goldstein & Levy, P.A., General Counsel
January 7, 2015 | Mortage Forgiveness Debt Relief Act Extended Retroactively for 2014 Uncertain Whether Extension Through 2015 Will Come…
On December 16, 2014, President Obama signed a bill that extended the Mortgage Forgiveness Debt Relief Act retroactively to cover mortgage debt cancelled in 2014. The Mortgage Forgiveness Debt Relief Act (MFDRA) prevented homeowners who went through a short sale from being taxed on the amount of their home mortgage debt that had been forgiven. For homeowners to qualify for a tax break in 2014, their short sale must have closed by December 31, 2014.
The Act was only 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.
According to a brief from the National Association of Realtors (NAR), about 5.3 million homes are still under water. In addition, there are still more than 1 million homes in the process of foreclosure. If the Mortgage Forgiveness Debt Relief Act is not extended further, hundreds of thousands of American families who did the right thing by short-selling their home will have to pay income tax on income they never received.