Mortgage Forgiveness Debt Relief Act of 2007

Passed by Congress in 2007, the Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) , is set to expire at the end of the year; this is bad news for over 11 million borrowers that are underwater. If not renewed, any forgiven debt could be considered taxable income.
Receipt of borrowed money from a bank is not a taxable event because the loan must be paid back. If you are unable to pay your mortgage and the bank forgives the debt in either a short sale or foreclosure, the forgiven amount may be considered income and, thus, taxable. Depending on your tax bracket, this can cost you $15,000.00 to $35,000.00 per $100,000.00 borrowed. Since December 20, 2007, the MFDRA forgave this tax liability and benefited millions of American who were foreclosed, sold their homes short of the full principal balance owed the bank, or re-structured their loans and enjoyed forgiveness of a portion of their principal balance. This act is set to expire on December 31, 2012. President Obama proposed extending the act until 2015, but that does not mean Congress will follow. Congressman Tom Reed, from upstate New York announced recently that he has introduced HR 4336,the Mortgage Cancellation Tax Relief Act of 2012, in the House of Representatives. The bill, which has 10 co-sponsors, will extend expiring tax relief for forgiven mortgage debt. Notwithstanding the new bill, anyone who is in financial trouble should try to take advantage of this break before it expires.

More information about the Mortgage Forgiveness Debt Relief Act can be found at http://www.irs.gov/individuals/article/0,,id=179414,00.html


Created By: The Cornerstone Land Abstract LLC Team
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