On June 20, 2013, NAR 2013 President Gary Thomas sent a letter to Senators Debbie Stabenow (D-MI) and Dean Heller (R-NV) expressing gratitude for introducing S. 1187, “The Mortgage Forgiveness Tax Relief Act.” This bill would extend for two years the current law provision that allows tax relief for homeowners when lenders forgive some portion of mortgage debt they owe, such as in a short sale.
Federal tax law generally provides that when individuals are forgiven of debt, they have taxable income. However, an NAR-endorsed provision first enacted in 2007 provided relief to most taxpayers who found themselves with forgiven mortgage debt in connection with their principal residence. Unfortunately, the provision was only temporary and has expired and been extended several times. The most recent extension is scheduled to expire at the end of 2013. S. 1187 would extend the provision through the end of 2015.