Posted on April 4, 2014 - 01:43 PM
by Andrea Wisniewski
The Senate Finance Committee has passed a two-year retroactive extension of tax relief for households who’ve had mortgage debt forgiven by a lender as part of a short sale or loan modification.
The issue has been one of NAR’s top legislative priorities since 2007, when the association worked with lawmakers to enact the relief into law and also later to encourage them to extend the relief in 2008 and 2012.
The relief expired at the end of last year, and unless the full Senate and House approve the extension, households will face the prospect that when they file their returns next year, they’ll pay tax on so-called phantom income, which is the amount of debt forgiven. Absent the provision, the tax law provides that such forgiven debt is income.