Mortgage Forgiveness Debt Relief extended until 2014

As we all are listening to reports about the bill on the “fiscal cliff” compromise, like many pieces of legislation you never really know what’s in it.

In this case, for us in the REALTOR® family and our clients, there is some good news. Several of the provisions contained in the American Taxpayer Relief Act of 2012 have been on the radar of the National Association of REALTORS® (NAR) and one in particular has been the subject of laser focus. I am referring to the Mortgage Forgiveness Debt Relief Act.

This law, which was the subject of a recent NAR Call to Action, was extended through Jan. 1, 2014. According to NAR, “The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence. For homeowner’s to qualify, their debt must have been used to “buy, build, or substantially improve” their principal residence and be secured by that residence.”

The continuation of this tax relief is particularly important in light of the fact that while things are improving in the marketplace, we still are not out of the woods.

This benefit is very important to underwater clients who are either attempting a short sale, deed in lieu and those who are trying to obtain principal reductions on their mortgages. Here in our state the Illinois Housing Development Authority (IHDA) is on the front line of this and agree that this extension was a key component to the bill.

“The exemption on debt forgiveness is a great victory for Illinois’ distressed homeowners,” said Mary R. Kenney, executive director of the Illinois Housing Development Authority. “The extension of this exclusion will provide additional help to Illinois homeowners seeking relief in the form of loan modifications through various state and federal programs.”

The other provisions include, capital gains, estate tax, energy efficient tax credits, mortgage insurance premium deductions, and of particular interest to our commercial and investment brokers, leasehold improvements. There are income provisions on some of these issues, details that can be found by clicking here.

As far as the Illinois Congressional delegation, all voted yes except for Reps. Randy Hultgren (R-Winfield), Peter Roskam (R-Wheaton), Joe Walsh (R-McHenry), and Bobby Schilling (R-Rock Island). Sen. Mark Kirk (R-Illinois) did not vote and will be returning to the Senate in the next several days.

This legislation however, is not the end to tax and overall fiscal reform. Discussions on spending and taxation will continue to be a highlight of the new Congress.

 

This entry was posted in Uncategorized by Sharon Gorrell, IAR Housing Policy Advisor. Bookmark the permalink.

About Sharon Gorrell, IAR Housing Policy Advisor

Sharon Gorrell is Housing Policy Advisor for the Illinois Association of REALTORS®. Through research and analysis she provides IAR leadership, committees, and governmental affairs staff well-informed expertise on local, state, and national housing policy issues and programs. Her work assists IAR in developing sound housing and housing finance policy positions and programs. She develops and maintains relationships with other associations, agencies and organizations that engage in the discussion and development of policies that affect housing and access to housing, and serves as the voice for and liaison of the REALTOR® organization to such groups. She serves as the IAR staff executive for the Housing Opportunity Working Group, Business Diversity Working Group, Federal Political Coordinators Working Group and Community Development Resource Working Group.

One thought on “Mortgage Forgiveness Debt Relief extended until 2014

  1. Do these Improvements have to be made in 2012 or can they have been made prior,I have a client that is underwater but within the last 5-6 years has made lots of improvements to his property. He is trying to get a principal reduction on his mortgage.Do you have any advise for me to relay any advise would be appreciated.And also when all is paid off is there any penalties at the end of the mortgage.Thank you.

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