DEMAND That Congress Renew 2007 Tax Break For Distressed Homeowners!!!
Congressional 'Lollygagging" Will Enable IRS to tax ALREADY Broke, Foreclosed, Homeowners in the 10's of Thousands of Dollars
http://www.washingtonpost.com/business/economy/distressed-homeowners-seeking-mortgage-relief-could-get-stuck-with-higher-taxes/2014/04/11/ba3d7498-be6b-11e3-b195-dd0c1174052c_story.html?hpid=z1
Struggling homeowners across the country could face significant new tax bills if they receive mortgage relief from their banks, a prospect that threatens to slow the housing recovery and put further strain on distressed borrowers.
The collapse of the housing market and plunging home prices left millions of people stuck owing more on their mortgages than their homes were worth. Some have worked with their banks to reduce the loan amount to avoid foreclosure or enable a sale.
In 2007, Congress adopted a law that spared those homeowners from being taxed on the amount of the loan that was forgiven.
But that tax break expired in December, and now the forgiven debt can be counted as income by the IRS. Housing advocates worry that the lapse could scare homeowners away from making a deal with their bank, which could disrupt efforts to reduce foreclosures and harm borrowers who were just getting back on their feet.
Stella Thompson said she is looking at a $30,000 tax bill on her Seattle area home.
After Thompson and her husband separated a few years ago, they fell behind on their mortgage payments. This month, with their lender?s approval, they sold their house for $85,000 less than they owe on the loan. Had the tax break been in place, they would not owe taxes on the forgiven debt. Now, they might.
?That?s a real hardship,? said Thompson, 55, who moved out of the house in 2011 and rents a duplex. ?I live paycheck-toĆ‚Āpaycheck and barely get by financially.?
A recent analysis by the Urban Institute found that about 2 million homeowners will be at risk of incurring that kind of tax liability. A congressional analysis estimates that borrowers will be on the hook for $5.4 billion in extra taxes if Congress fails to renew the tax break, known as the Mortgage Forgiveness Debt Relief Act.
At issue are millions of underwater borrowers who are unable to refinance or sell their way out of trouble unless they strike a deal with their lenders, such as a reduction in the amount owed on the loan or the approval of a ?short sale,? such as Thompson?s.
For years, the Obama administration has encouraged such solutions, recognizing that they are a cornerstone in the housing sector?s recovery. Congress did its part in 2007 when it created the tax break, and lawmakers have renewed it twice.
Despite the tax break?s broad popularity, it is unclear whether Congress will renew it again. This month, the Senate Finance Committee voted to revive the break for the 2014 and 2015 tax years. But the provision is part of a larger package of expired breaks that is ensnared in a partisan dispute over comprehensive tax reform, and it could be derailed on the Senate floor or in the Republican-controlled House.
If history holds, Congress is unlikely to settle the mat
Struggling homeowners across the country could face significant new tax bills if they receive mortgage relief from their banks, a prospect that threatens to slow the housing recovery and put further strain on distressed borrowers.
The collapse of the housing market and plunging home prices left millions of people stuck owing more on their mortgages than their homes were worth. Some have worked with their banks to reduce the loan amount to avoid foreclosure or enable a sale.
In 2007, Congress adopted a law that spared those homeowners from being taxed on the amount of the loan that was forgiven.
But that tax break expired in December, and now the forgiven debt can be counted as income by the IRS. Housing advocates worry that the lapse could scare homeowners away from making a deal with their bank, which could disrupt efforts to reduce foreclosures and harm borrowers who were just getting back on their feet.
Stella Thompson said she is looking at a $30,000 tax bill on her Seattle area home.
After Thompson and her husband separated a few years ago, they fell behind on their mortgage payments. This month, with their lender?s approval, they sold their house for $85,000 less than they owe on the loan. Had the tax break been in place, they would not owe taxes on the forgiven debt. Now, they might.
?That?s a real hardship,? said Thompson, 55, who moved out of the house in 2011 and rents a duplex. ?I live paycheck-toĆ‚Āpaycheck and barely get by financially.?
A recent analysis by the Urban Institute found that about 2 million homeowners will be at risk of incurring that kind of tax liability. A congressional analysis estimates that borrowers will be on the hook for $5.4 billion in extra taxes if Congress fails to renew the tax break, known as the Mortgage Forgiveness Debt Relief Act.
At issue are millions of underwater borrowers who are unable to refinance or sell their way out of trouble unless they strike a deal with their lenders, such as a reduction in the amount owed on the loan or the approval of a ?short sale,? such as Thompson?s.
For years, the Obama administration has encouraged such solutions, recognizing that they are a cornerstone in the housing sector?s recovery. Congress did its part in 2007 when it created the tax break, and lawmakers have renewed it twice.
Despite the tax break?s broad popularity, it is unclear whether Congress will renew it again. This month, the Senate Finance Committee voted to revive the break for the 2014 and 2015 tax years. But the provision is part of a larger package of expired breaks that is ensnared in a partisan dispute over comprehensive tax reform, and it could be derailed on the Senate floor or in the Republican-controlled House.
If history holds, Congress is unlikely to settle the mat
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