Industry News

Congress OKs tax relief on forgiven mortgage debt

President expected to sign three-year exemption into law

Learn the New Luxury Playbook at Luxury Connect | October 18-19 at the Beverly Hills Hotel

Congress has passed legislation that would open up a three-year window during which homeowners who end up in foreclosure -- or negotiate workouts or short sales with lenders -- won't have to pay taxes on up to $2 million of forgiven debt. The House has approved the Senate's amendments to HR 3648, the Mortgage Forgiveness Debt Relief Act, which eliminate provisions of the bill opposed by the Bush administration. As originally passed by the House on Oct. 4, the bill would have permanently changed the tax code to exempt forgiven debt on a primary residence from being taxed as income. But the exemption -- along with an extension of an existing tax deduction for private mortgage insurance -- would have reduced tax revenues by about $2 billion over a 10-year period. So the House bill had envisioned tightening the rules for claiming deductions on the sale of a second home, vacation or rental property converted to a primary residence. In approving its own bill Friday, SB 1394...