A Must Do to Keep the Economy Going
The Senate Finance Committee approved a bipartisan bill that would extend the Mortgage Forgiveness Debt Relief Act through 2013. Why is this so important? Several reasons: The debt relief law spares homeowners who receive principle reductions on their mortgages from being hit with hefty federal income taxes on the amounts forgiven. And without it, millions of owners who go through foreclosure or leave their homes after short sales would experience even more financial stress. The law is set to expire at the end of December. But the Senate committee managed to pull together enough votes in August to pass the debt relief extension, after heavy lobbying by the National Association of Realtors and the National Association of Home Builders.
The mortgage debt relief extension could ultimately affect millions of families who are underwater on their loans, delinquent on their payments and heading for foreclosure, short sales or deeds in lieu of foreclosure settlements. Under the federal tax code, all types of forgiven debt are treated as ordinary income, subject to regular tax rates.
The mortgage insurance deduction is another key housing benefit that made it into the Senate committee's 11th hour extender bill. Under a provision in the tax code that expired last December, certain borrowers could write off their mortgage insurance premiums on their federal income taxes, just as they do with mortgage interest. To qualify for a full deduction, borrowers could not have adjusted gross incomes greater than $100,000 ($50,000 for married taxpayers filing separate returns). The Senate's bill would extend the write-off retroactively to this past Jan. 1, and would continue it through December 2013. No buyer or owner who planned to write off premiums during 2012 would be penalized, in other words, despite the expiration last December.
What are your thoughts on this …. and what would you do to help or quash the two housing benefits?