Black & LoBello

As part of the bill to avoid the so-called “fiscal cliff,” Congress extended the Mortgage Forgiveness Debt Relief Act for another year until January 1, 2014.  Created in 2007, the Mortgage Forgiveness Debt Relief Act protects homeowners from liability for income taxes on the portion of their primary residence’s mortgage that is forgiven in a short sale, principle reduction, or foreclosure.  Before Congress enacted this provision, the federal government taxed homeowners on the forgiven debt – also known as debt discharge income – as this was considered “taxable income.”

This news brings much needed relief to Nevadans, many of whom are seeking to modify their current home mortgages or short sell.  Nevadan homeowners can now obtain debt relief through a short sale without any tax liability for the related debt discharge income.