Is the Mortgage Forgiveness Debt Relief Act extended?
People have been very worried with the expiration of the relief enacted in 2007 entitled “The Mortgage Forgiveness Debt Relief Act of 2007.” In fact, there are some thinking they may be looking to cancel short sales in progress and having to ask (or beg) their banks to reinstate their loans, help them keep their homes, or seek other remedies in order to avoid a foreclosure or short sale in this new year. If one can not afford their mortgage debt, how can they afford a big tax bill in the form of “cancelled debt” or call the forgiveness of debt, income?
Income? Ugh, the final insult for many facing foreclosure, short sale or loan modification in California. Some have called this short sale tax relief, or foreclosure tax relief.
Families and individuals could be relieved of the obligation of taxation of this forgiven debt, called income, for their principal residence and up to 2 million dollars. The mortgage forgiveness debt relief act has been a very important factor in a decision to short sale, foreclose or look into a bankruptcy.
Read the IRS rules of The Mortgage Forgiveness Debt Relief Act and Debt Cancellation here.
But YES! It appears to be extended through to January 1, 2014. It looks like it IS part of the fiscal cliff bill that was passed through the Senate and House today/tonight and is ready for the President’s signature. You can read the PDF version of the “package” and see the following language:
SEC. 202. EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.
(a) IN GENERAL.—Subparagraph (E) of section 108(a)(1) is amended by striking ‘‘January 1, 2013’’ and inserting ‘‘January 1, 2014’’.
(b) EFFECTIVE DATE.—The amendment made by this section shall apply to indebtedness discharged after December 31, 2012
Has California extended it’s Mortgage Forgiveness Debt Relief for 2013?
Not yet. Keep in mind the news tonight as it relates to this “fiscal cliff package” is for federal IRS tax purposes and does not apply to individual states, and at this time we do not know if California will extend their similar debt relief act, though they did extend the California provisions once before in 2010. See California’s Mortgage Forgiveness Debt Relief information here. So stay tuned for that, I’ll keep you updated the best I can here as soon as there is any update on the state provisions of this act.
If you are thinking of selling your home, need to do a short sale, or want information about options to avoid foreclosure for your Contra Costa home, call me!
I serve the areas of Concord, Clayton, Walnut Creek, Pleasant Hill, Martinez, Antioch, Brentwood, Pittsburg, Bay Point, Lafayette, Orinda, Moraga, Danville, San Ramon and many other areas of Contra Costa and some parts of Alameda county. I’m well versed in short sales and can offer you referrals to qualified attorneys, CPAs and tax professionals to answer your questions.
Catherine Myers, Broker Associate
Prudential California Realty
Offices in Pleasant Hill, Walnut Creek and San Ramon
Keep in mind, that the information provided above is not designed to substitute for professional advice from a competent, experienced tax professional. The information may be incorrect or your situation may be such that it does not apply to you. Be careful about relying on any internet source for information without also checking in with a professional that knows YOUR individual situation.