Indiana Attorney General Greg Zoeller joined 41 other attorneys general recently to ask Congress to extend soon-to-be expired tax relief for distressed homeowners.
Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes, and is set to expire on Dec. 31.
“We believe if Congress does not extend this critical tax exclusion into next year, struggling homeowners and the slowing improving housing market will take a setback,†Zoeller said. “Failure to act means Hoosier homeowners who have received mortgage debt relief could be hit with a tax bill they simply can’t afford.â€
An extension for 2014 is included in the Mortgage Forgiveness Tax Relief Act (S. 1187 and H.R. 2788), both of which are in committee; it is uncertain when these critical bills may be considered. The current Ryan-Murray budget proposal does not include the exemption provision.
Zoeller said the expiration comes at a time when the housing market, while still fragile, has shown signs of gradual improvement over the last year. Data shows that home prices have increased this year, and the S&P/Case-Shiller home price index reported gains of 12 percent or more. CoreLogic has also estimated that 2.5 million more families have had their homes returned to positive equity in the second quarter of 2013.
Last year, Zoeller joined 41 other attorneys general in successfully persuading Congress to extend these benefits into 2013.
Click here to view the letter sent by attorneys general to Congress.
