Mortgage Debt Relief Act to be Extended Through December 31, 2014
The Mortgage Debt Relief Act of 2007 basically provided for no income tax to a borrower on any deficiency after a foreclosure or a short sale of a mortgage used to purchase a home, or make improvements to the home. The Act expired December 31, 2013.
Last week Congress passed, and President Obama is expected to sign, legislation to extend the Act until December 31, 2014. In other words, any deficiency as discussed above will not be taxable income to a borrower if the foreclosure or short sale occurred in 2014.
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