Are Tax Abatement on Principal Reductions Gone for Good?
The Mortgage Debt Relief Forgiveness Act of 2007 was enacted by Congress to exempt homeowners from having to pay taxes on forgiven mortgage debt by foreclosure sale, short sale or a deed-in-lieu of foreclosure. Last year, President Obama extended the this law through December 31, 2016. Unless Congress can agree to retroactively extend the Act, homeowners will be taxed on all residential mortgage debt discharged by their lenders.
The below video features Roy Oppenheim as he discusses the expiration of The Mortgage Debt Relief Forgiveness Act and the effect this will have on taxable “income” after a principal reduction or waiver of deficiency.