According to a recent article in the New York Times, certain mortgage debts forgiven by lenders that have been exempted from taxation in the past may not be exempt for much longer.
New York Times reporter Lisa Prevost writes, “As it stands now, any mortgage debt forgiven by a lender in a short sale, loan modification or foreclosure is exempt from federal taxation. Come Jan. 1, that exemption expires. Borrowers will have to count mortgage relief from lenders as income on their federal tax returns.”
“An extension to the tax exemption – established under the Mortgage Forgiveness Debt Relief Act of 2007 – is a strong possibility,” Prevost continues, “but given that Congress will have to grapple with serious fiscal issues after the November elections, there is no guarantee the exemption will emerge from those negotiations intact.”
How do you think the loss of this exemption will impact the market? Do you think the exemption will get an extension? Let us know in the comments!