Tuesday, December 4, 2012

AG Schmidt asks Congress to extend tax relief for distressed homeowners

Kansas Attorney General Derek Schmidt is urging Congress to extend tax relief for consumers who have mortgage debt canceled or forgiven because of financial hardship or a decline in housing values.

Schmidt is one of 41 attorneys general to sign a letter to U.S. House and Senate leaders, urging them to extend the exclusion, which has been in effect since 2007 and which will otherwise expire on Dec. 31, 2012.

The expiration comes at a time when homeowners nationwide are benefiting from the $25 billion national settlement agreement with the nation’s five largest loan servicing companies.

That agreement has already provided more than $24 million in debt relief to Kansas homeowners and $17 billion nationally. Many other banks also offer mortgage modification and debt relief programs.

“Congress should extend this critical tax exclusion so that the very families who can least afford it are not stuck with an unexpected tax bill,” Schmidt said. “Extending this tax exclusion could save taxpayers another $1.3 billion over two years.”

Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income.

This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.

An extension of the tax relief is included in the Family and Business Tax Cut Certainty Act of 2012 which recently passed out of the Senate Finance Committee with bipartisan support.