Dec 27

Underwater Home Owners Face Heavier Tax Burden

Underwater Home Owners Face Heavier Tax Burden

 

Underwater Home Owners Face Heavier Tax Burden. Image courtesy of Salvatore Vuono / FreeDigitalPhotos.net

Underwater Home Owners Face Heavier Tax Burden. Image courtesy of Salvatore Vuono / FreeDigitalPhotos.net

If Congress doesn’t act on the Mortgage Forgiveness Debt Relief Act, which expires at the end of this year, it could leave distressed borrowers with an additional financial burden in 2014.

The measure was designed to keep underwater homeowners from having to pay income taxes on the portion of their mortgage debt that was wiped out in a short sale or other mitigation tactic.

“What you’re looking at is people who have lost their house,” says Marceline White of the Maryland Consumer Rights Coalition. “And then to have them hit with this [tax] just boggles the mind.”

Maryland legislators plan to renew a measure exempting residents from state taxes even if the federal law sunsets, but few other states have similar protections in place. There are three bills on Capitol Hill seeking extension of the federal law, but it is uncertain how much of a priority the issue will be in Congress next year.

“We’re far from out of the foreclosure crisis,” White warned.  “We hope that policymakers look at longer-term solutions.”

Source: “Underwater Homeowners Could Face Extra Tax Burden in 2014,” The Washington Post (Dec. 26, 2013)

 

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