Tag Archives: Mortgage Forgiveness Debt Relief Act of 2007

As part of the law passed as a last minute escape of the so-called fiscal cliff, Congress extended the Mortgage Forgiveness Debt Relief Act to the great relief of homeowners who’ve suffered foreclosure.   Injury, but Not Insult First passed in 2007, the act allows mortgage holders to avoid paying income tax on the value lost when they are forced to sell their homes at prices below their market value. Normally, the IRS considers that lost value as a break …

A federal law that has helped consumers avoid paying taxes on money they never even had is set to expire at the end of the year. If it does, homeowners who are forgiven any of their debt when they are foreclosed on will have to pay income tax on the forgiven amount.   Forgiven “Income” To Be Taxed It seems crazy, but it’s true: Normally, if a homeowner owes $100,000 on her mortgage, but the property sells in foreclosure for …