If your home is facing foreclosure and you were unable to sell your house in 2012, there is good news: The Mortgage Debt Relief Act was extended by Congress for another year as part of the legislation that prevented the nation from the “fiscal cliff.”
This is especially good news to homeowners in South Florida, where home prices have dropped drastically since December 2006.
Normally, when the bank forgives a portion of your loan, it is considered taxable income. The Mortgage Debt Relief Act allows homeowners who sell their homes through foreclosure or short sale to be exempt from being taxed on up to $2 million in savings. Homeowners who choose Loan Modification are also exempt up to the same amount.
Since it was passed in 2007, the Mortgage Debt Relief Act has saved Floridians alone millions of dollars. The bill will be extended until January 1, 2014.
Due to the extension of only one year, realtors are encouraging homeowners facing foreclosures to act, and some are even calling 2014 “the year of the short-sale.”