Bill ensures forgiven mortgage value not taxed as income
WASHINGTON, DC – July 24, 2013 – (RealEstateRama) — With Las Vegas and the state of Nevada still struggling to reverse the devastating effects of the housing crisis, Congressman Joe Heck (NV-03) today introduced legislation that would help homeowners who are underwater on their mortgage. The Mortgage Forgiveness Tax Relief Act ensures underwater homeowners are not subjected to additional income taxes if a portion of their mortgage is forgiven. Homeowners who undergo a mortgage refinancing or “short sell” their home would be required to pay an additional income tax on the difference between the homes original value and the current value. However, Rep. Heck’s bill would prevent that sum from being taxed as income because the homeowner never actually receives that money.
“Struggling homeowners who are underwater cannot afford to be taxed on money they never actually receive,” Rep. Heck said. “Many of these distressed homeowners are going through refinancing and short sale proceedings because they can no longer afford to stay in their homes. This additional tax on shadow income would only prolong their suffering and make it all the more difficult for the Nevada economy and housing market to fully recover. Congress must act to ensure that this mortgage forgiveness relief is extended.”
The Mortgage Debt Relief Act of 2007 was extended for one year as part of the January “fiscal cliff” deal which Congressman Heck supported. That extension will expire at the end of the 2013 unless Congress acts.
Senators Dean Heller (NV) and Debbie Stabenow (MI) introduced the Mortgage Forgiveness Tax Relief Act in the Senate. According to a letter sent to the Senators by Nevada Governor Brian Sandoval, as of the first quarter of 2013, about 45 percent of Nevada homeowners owe more than their home is worth.
H.R. 2788, the Mortgage Forgiveness Tax Relief Act, is attached.