NAR-backed mortgage debt relief clears committee

04/09/2014

NAR-backed mortgage debt relief clears committee

NAR-backed mortgage debt relief clears committee


 
WASHINGTON – April 4, 2014 – The Senate Finance Committee passed a two-year retroactive extension of tax relief for households who’ve had mortgage debt forgiven by a lender as part of a short sale or loan modification. While it’s only a small step, it moves the bill closer to full consideration by the Senate.

“We applaud the Senate Finance Committee for approving a bipartisan compromise bill today,” National Association of Realtors® (NAR) President Steve Brown says. The legislation still needs to be passed by the full Senate and also by the House before moving on for President Obama’s signature or veto.

The issue is one of NAR’s top legislative priorities since 2007, when the association worked with lawmakers to enact the relief into law, and also later encourage them to extend the relief in 2008 and 2012.

The tax relief expired at the end of last year, and unless the full Senate and House approve an extension, households face the prospect of paying taxes on forgiven money when they file their returns next year. Called phantom income, it’s the amount of money a bank forgives on a mortgage debt in a short sale. Since the bank is theoretically giving that money to a home seller, it’s considered taxable income under the law.

“This is, at its core, an issue that’s all about fairness,” Brown says. “It’s unfair to ask homeowners who are underwater on their mortgage and who make the prudent decision to do a short sale instead of allowing their mortgage to go into foreclosure to pay tax on the forgiven amount of the loan.”

Brown says the tax hit encourages owners to walk away rather than sell their house, which hurts neighborhoods and the communities they’re in.

The tax relief provided in the past has been one of Congress’ bipartisan success stories, and there’s a good chance an extension will pass Congress this year, too, some analysts say.

“We expect a large number of short sales [an estimated 300,000 to 350,000] this year,” says Brown. Those numbers suggest that there remains a great need for the tax relief, even though housing markets around the country are much improved from where they were at the height of the housing slowdown.

“The need is still clearly there,” Brown says.

To help make its case, NAR has joined with about two dozen consumer, real estate and other groups to run a forceful ad in key publications that educates lawmakers about the continuing need for relief. “Upside-down homeowners need tax relief now,” the ad says.

The legislation passed by the committee also extends the 15-year cost recovery for qualified leasehold improvements and a provision that lets taxpayers expense certain qualified real property; and it extends the deduction for energy efficient commercial buildings.

NAR offers more insight into mortgage tax relief on its website.
Source: Robert Freedman, REALTOR® Magazine

© 2014 Florida Realtors®

 

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