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President Obama extends Mortgage Debt Forgiveness Act

If you had to sell your home in a short sale in 2015, you may be in luck on your taxes. President Obama has signed a federal spending bill into law that will extend the Mortgage Debt Forgiveness Act as far as 2017.

Previously, this act was going to expire at the end of 2015, so anyone who received a mortgage forgiveness during a short sale would have had to count that forgiveness amount as income on their tax returns. That could result in extremely high taxes for people who were already struggling.

Because the United States has been in a recession and is in economic recovery, the plan was introduced to help homeowners. Now, the goal of extending the bill has made headlines as more people can benefit from the relief on his or her 2017 tax bills.

The bill, an extension, was included in the 2016 federal appropriations and tax relief bill. This bill recently passed through both the Senate and House of Representatives, and the president signed shortly thereafter, making it legal for homeowners to discharge, and have forgiven, the so-called income they gain through the debt forgiveness.

If you're going through a short sale or are considering it, now may be a good time to begin. The extension only lasts a short time currently, and it won't be determined if the forgiveness will be further extended for some time. At present, there are no indications that the forgiveness will last beyond 2016 and entering into the 2017 tax year. If you have questions about how this can affect your taxes, your attorney can help you understand your rights.

Source: HousingWire, "Short sale tax break on verge of being extended until 2017," Ben Lane, Dec. 18, 2015

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