» LATEST UPDATE: 6/27/2013 – New Co-Sponsor for S 1187
It’s mid-year and many are wondering whether or not the tax protections originally extended as part of the Mortgage Forgiveness Debt Relief Act of 2007 will be extended after the December 31, 2013 expiration. As you may remember, the Act was extended at the very last minute last year as part of “fiscal cliff” negotiations. The only down side was that this last minute aid to homeowners was only extended for an additional year. You may also remember that there were several bills with Congressional committees that would have extended the protections for longer. Those bills were: HR 4202 which would extend tax protections through December 31, 2014, HR 4250, which would extend tax protections through December 31, 2015, The Homeowner Tax Fairness Act (HR 4290) which would extend tax protections through December 31, 2015, The Mortgage Forgiveness Tax Relief Act (S 2250) which would extend tax protections through December 31, 2014, HR 4336 which would have extended tax protections through December 31, 2013 and The Homeowners and Military Families Tax Fairness Act (S 3224) which would extend tax protections through December 31, 2015.
If anyone needs a reminder, the Act is meant to protect those from taxation on mortgage related debt that is cancelled after a foreclosure, short sale or deed in lieu. The Act excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and was incurred as a result of the acquisition, construction or substantial improvement of the property. This means that homeowners who foreclosed on a principal residence and have never refinanced by taking out a home equity line of credit are not responsible for taxes on the difference between the loan balance and the amount the property is sold at auction.
Unfortunately, all of the aforementioned bills “died” in their committees, as most eventually do. Only 11% of bills made it past committee and only about 3% were enacted in 2011–2013.
There is still hope! The Mortgage Forgiveness Tax Relief Act (S 2250) was re-introduced as S 1187 on June 19, 2013. It was sponsored by Senator Debbie Stabenow (D-MI) and currently has four co-sponsors (2D, 2R). The Senate Finance Committee is considering the bill and will determine whether it will be sent on to the House or Senate as a whole. If enacted, S 1187 would extend MFDRA through 2015.
Check back often for updates! We will continue to track this bill, as well as any other related bills, and keep this page updated with the latest information regarding their progression through congress.
Summary: A bill to prevent homeowners from being forced to pay taxes on forgiven mortgage loan debt.
Introduced: June 19, 2013
Status: This bill was assigned to the Senate Finance Committee on June 19, 2013 which will consider it before possibly sending it on to the House or Senate as a whole. The committee chair determines whether a bill will move past the committee stage.
Sponsor: Sen. Debbie Stabenow [D-MI]
Co-Sponsors (4): Heller, Dean (R-NV)
Isakson, John “Johnny” (R-GA)
Menéndez, Robert “Bob” (D-NJ)
Boxer, Barbara (D-CA) (joined June 27, 2013)