Mortgage Cancellation Relief Passes Senate
On Tuesday, December 16, the Senate passed mortgage debt cancellation relief as part of a large “tax-extender” bill just before adjourning for 2014.
REALTORS® across the country fought hard for this legislative victory. In Colorado alone, over 15 percent of all Colorado REALTORS® responded to NAR’s Call for Action, which urged them to contact their Senators to ask for an extension of the Mortgage Debt Forgiveness Act.
The provision, passed by a wide margin ( a vote of 76-16), prohibits the IRS from taxing debt lenders forgive in a short sale, foreclosure, or loan modification for the 2014 tax year. The House had previously passed the extension in early December, read more about that Here. The Mortgage Debt Forgiveness Act now heads to President Obama’s desk, who is expected to sign the bill into law.
If Congress had failed to act on the renewal of the tax breaks, any mortgage forgiveness granted in a short sale would have been counted as “phantom income” for homeowners whose banks allowed to sell their homes for less than the amount of their mortgage. However, the extension only applies to short sales conducted in 2014. Any further extension of the short sale tax break will be discussed by newly elected members of Congress when it begins its 2015 session in January.
“NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said.
The legislation also includes one-year extensions of the 15-year depreciation schedule for leasehold improvements and the deduction for improvements to energy efficient commercial buildings.
NAR also pressed lawmakers to extend terrorism risk insurance, which is critical to commercial mortgage finance, but that provision will have to be discussed in 2015 under the new Congress.