Congress May End Program Allowing Tax Relief for Mortgage Modifiers
Saturday, February 25, 2012
A key piece of the federal government’s mortgage-relief strategy is set to expire this year, leaving thousands of Americans at risk of getting hit with a large tax bill.
The Mortgage Forgiveness Debt Relief Act of 2007 protected homeowners who restructured their mortgages, short-sold their homes or lost their homes to foreclosure by protecting them from having to pay taxes on the amount of debt that was forgiven.
The tax break will not continue past the end of this year unless Congress reauthorizes it, and some Republicans may be loathe to do so. Deficit hawks point to the price tag of renewing the legislation—$2.7 billion over two years—as reason for ending the mortgage help.
Before 2007, all debt cancellations were treated as taxable income. In October 2007, the Mortgage Forgiveness Debt Relief Act passed in the House of Representatives by a vote of 396 to 7. However, among the 27 nay voters was current Speaker of the House John Boehner. Others who voted against it were Ron Paul (R-Texas), Michele Bachmann (R-Minnesota) and Darrell Issa (R-California), who is now chairman of the House Committee on Oversight and Government Reform.
-David Wallechinsky, Noel Brinkerhoff
To Learn More:
Mortgage Relief Faces A Tax-Law Nightmare (by Kenneth Harney, Seattle Times)
Homeowners Who Negotiate Debt Relief Could Soon Face Massive Tax Bill (by Lois Beckett, ProPublica)
The Obama Mortgage Settlement is Just Another Bank Bailout in Disguise (by David Wallechinsky, AllGov)
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