As the duplex foreclosure crisis wears on, one of the most important things we often forget is that traditionally, the forgiveness of mortgage debt through a short sale or foreclosure is a taxable event.
The Mortgage Debt Relief Act of 2007 made forgiven mortgage debt tax-exempt. In order to qualify, the debt had to be on a principal residence, and the amount owed could not exceed $2 million.
On December 31, 2013, this tax exemption expired.
And to date, no extension has been passed.
On Tuesday, Congressmen Bill Foster (D-Illinois) introduced the Homeowner’s Debt Relief Extension Act, which would extend the exemption for two more years.
To offset the extension, the bill calls for the repeal of a tax break for oil and gas companies.
Keep an eye on the bill, More importantly, if you’re facing losing your duplex or home to foreclosure, or the necessity of a short sale, be sure to consult your tax professional first so you’re fully informed of any tax consequences.