Congress has extended a mortgage relief tax provision through the end of 2013.
The Mortgage Forgiveness Debt Relief Act was extended for one year as part of the “fiscal cliff” negotiations over taxes and spending policies.
Passed in 2007, the act kept homeowners who negotiated a short sale from having to include the savings on that sale as taxable income.
Some real estate officials expressed concern that ending the debt relief act would hamper the national housing market recovery. Short sales have been seen as a more favorable alternative to foreclosure for homeowners and lenders.
Without the provision, a homeowner who owes $300,000 on a mortgage and conducts a short sale for $200,000 would be taxed on the $100,000 difference.
It was originally set to expire in 2009. But Congress extended the act as the foreclosure crisis deepened.