Are you in the midst of a short sale, or about to do one, and worried about the associated tax burden that goes along with it? There's so good news for you, thanks to a bill signed yesterday, the first GENUINE relief for homeowners trying to avoid foreclosure.
Yesterday, President Bush signed H.R. 3648, The Mortgage Forgiveness Act of 2007, into law, sparing homeowners the tax burden associated with canceled mortgage debt.
Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was considered taxable income. The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2009. The bill also extends the tax deduction for mortgage insurance premiums through 2014.
"This is going to make a happy holiday for many homeowners," President Bush said yesterday before signing the bill in to law. During the press conference he added the following:
"When you're
worried about making your payments, higher taxes are the last thing you
need to worry about. So this bill will create a three-year window for
homeowners to refinance their mortgage and pay no taxes on any debt
forgiveness that they receive. And it's a really good piece of
legislation. The provision will increase the incentive for borrowers
and lenders to work together to refinance loans – and it will allow
American families to secure lower mortgage payments without facing
higher taxes."
"There's more work to be done," Bush added, saying that Congress needs to pass legislation to strengthen Freddie Mac and Fannie Mae, to modernize FHA, and to allow the government to issue tax-exempt bonds for refinancing existing home loans.
It's still anyone's guess as to how much tax relief this is going to provide nationally, but the tax debt relief is definitely going to be huge. not only that, this may provide people with more room to negotiate on trying to get out from under than mortgage before the bank takes their home.
Great Post. I know this is great information to share with anyone who was facing a big tax bill.
Posted by: Alan Richardson | December 24, 2007 at 01:20 PM