Will the Mortgage Debt Relief Act Get Extended?

 The Mortgage Debt Relief Act, which allows homeowners who are doing a short sale to NOT PAY TAXES on debt forgiven by a lender during a short sale or foreclosure, is set to expire at the end of 2012. However the Senate Finance Committee approved a bipartisan bill that would extend if through 2013.  Next month the Senate will meet to vote on moving forward or not. What Does This Mean For Homeowners? This means that if the extension is approved, anyone who is considering a short sale still has time to do so and take advantage of the Mortgage Debt Relief Act. As a simple example of how this act can benefit homeowners, consider this scenario: If a homeowner owes $500,000 on their home and does a short sale for $400,000, then the bank is forgiving $100,000 of the amount due. Normally, this $100,000 would be taxable to the homeowner but this act prevents that from happening. Since a short sale process can take up to 6 months, now is a good time to discuss your options with us. Should the Mortgage Debt Relief Act get extended though 2013, that will provide plenty of time to complete the short sale process and help you take advantage of the tax benefits.