Signed into Law
Homeowners who had short sales in 2014 can now relax and breath a sigh of relief, as the Mortgage Debt Forgiveness Act was signed into law by President Barack Obama. Under this Act, any mortgage forgiveness achieved in a short sale is no longer counted as income for homeowners whose banks allowed to sell their homes for less than the amount of their mortgage. The Act was due to expire in 2014, but was extended by Congress.
The Mortgage Debt Forgiveness Act passed by a large margin in the House of Representatives three weeks ago and passed in the Senate two weeks ago. But the Act wasn’t made official until President Obama signed it into law, last week. The extension only applies to short sales that were administered in 2014. Any further extension of the short sale tax break will need to be taken into consideration by the newly elected members of Congress when the Congress this month. According to a recent estimate from RealtyTrac, the average short sale has an mortgage forgiveness estimated around $88,456. And according to further data provided by RealtyTrac, there have been more than 121,700 short sales through October of this year, with the total mortgage debt forgiveness being nearly $10.8 billion. RealtyTrac also estimated that the possible taxes on the average short sale to be $22,114, which would have brought the total tax debt to $2.7 billion.
When the Senate passed the Mortgage Debt Forgiveness Act, the National Association of Realtors welcomed the vote. “NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said. “Realtors strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed,” Polychron added.
“We are grateful to Sens. Debbie Stabenow, D-Mich., and Dean Heller, R-Nev., and Reps. Tom Reed, R-N.Y., and Charlie Rangel, D-N.Y., for championing the provision.”
If you are in the market for a new house and would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Lang Premier Properties. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.