Five Questions: Will I Owe Taxes on Forgiven Mortgage Debt?

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Five Questions: Will I Owe Taxes on Forgiven Mortgage Debt?

Five Questions: Will I Owe Taxes on Forgiven Mortgage Debt?

Wall Street Journal-

A key tax provision set to expire at the end of the year could trip up the Obama administration’s push to have banks forgive mortgage debt more often for borrowers who are underwater.

Five years ago, Congress passed a law, the Mortgage Forgiveness Debt Relief Act, that would prevent households from having to treating certain types of forgiven mortgage debt as taxable income.

If the provision expires as scheduled on Dec. 31, it could throw a wrench not only into efforts to trim loan balances for underwater borrowers, but also for short sales, where banks allow homeowners to sell their properties at a loss. Real-estate agents from Nevada to Florida have been using the looming expiration as a marketing tool, telling homeowners that now’s the time to do a short sale because come next January, they might owe taxes on it.

[WALL STREET JOURNAL]

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