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Short Sales and Taxes

Congress, in their infinite wisdom, let The Mortgage Debt Forgiveness Relief Act expire at the end of 2013. The Act provided a tax exemption to owner-occupied homeowners when their mortgage company forgives debt through a short sale or foreclosure.

The Mortgage Debt Forgiveness Act was originally passed in 2007 and was extended in 2009 through December 31st, 2012. It was then extended one final time by Congress, until December 31st, 2013. This means that in 2014 many homeowners will be on the hook for “short sale tax” or “foreclosure tax”.

So far, there has been no action since the first of the year and it doesn’t look like much is happening on it. Congress can make a law retro-active, but it doesn’t appear that they really care about this one.

A real bummer for those already in financial distress.