Connecticut Attorney General George Jepsen is again urging Congress to extend tax relief to families who receive mortgage debt relief.
Jepsen and Florida Attorney General Pamela Bondi have co-authored a letter asking Congressional leaders to again extend the Mortgage Forgiveness Debt Relief Act, passed as a one-year extension in 2013, according to a press release from Jepsen’s office.
The act, which has been in effect since 2007, allows homeowners who are forgiven mortgage debt in a foreclosure or short sale, to not pay taxes on the forgiven loan.
“You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you, the IRS explains.”
“I urge Congress to again extend this critical tax exclusion so that the very families that have been able to receive mortgage debt relief are not hit with tax bills they cannot afford,” Attorney General Jepsen said. “Extension of this tax relief is critical to the continued recovery of the housing market.”
The Great Recession prompted Congress to pass the act, and Jepsen said, failure to renew it will serve to “further hinder the economic recovery of those who have already lost so much.”