Mortgage Debt Forgiveness Averts “Cliff”

Congress’ “fiscal cliff” compromise is keeping the real estate industry on its recovery track, and even speeding up the process, according to many economists. In addition to holding tax hikes at bay for middle-income Americans, the settlement approved an extension that prevents distressed homeowners from being taxed on forgiven mortgage debt.

The exception for “qualified principal residence indebtedness” was created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners whose mortgages have been restructured to prevent foreclosures, or those who have gone through “short sales,” selling their homes for less than what is owed in mortgages. The exception allows homeowners to exclude from their income certain cancelled debt on their principal residence.

The relief act’s extension was seen as vital to the recovering housing market. Other real estate provisions in the “fiscal cliff” bill include extending the 10 percent tax credit (up to $500) to homeowners for energy improvements to existing homes through 2013 and made retroactive to cover 2012. Click here to read an article just published by The National Association of Realtors, of which I'm a member, that outlines other real estate provisions in the Bill. 

If these developments encourage you to review your real estate plans for 2013 and I can be of help, please call!