Pres. Obama Signs Extension of Mortgage Debt Forgiveness Law

by San Antonio Attorney

The Mortgage Forgiveness and Debt Relief Act of 2007 is extended under the 2016 Appropriations Bill signed by President Barack Obama on Dec. 18, 2015.

The extension of the law is very significant yet it was not publicized enough.

The Act is an enormous help for homeowners who continuously suffers under the burden of underwater mortgages.

The Mortgage Forgiveness and Debt Relief Act of 2007 allows a tax exemption for income or money saved from debt forgiveness related to home foreclosures, principal forgiveness of debts and short sales.

When a lender forgives a mortgage debt, it means that the lender give up their legal right to pursue any deficit in a short sale or opts not to take legal action for deficiency after a foreclose property is sold.  Usually, if a debt is forgiven, the IRS considers it as a regular income and therefore, taxable.

The Mortgage Forgiveness Debt Relief Act of 2007 allows a homeowner to exempt the money they get to keep from the forgiven amount on mortgage debt.

This recent extension is going to prolong this tax protection for taxpayers within the 2016 tax year.  Hence, if you surrendered your house in a foreclosure, deed in lieu, short sale or made a loan modification because your debt has been forgiven in 2015, or if unfortunately you experience any of these this year, you can avail of this latest extension of the law.

It is important to keep in mind that before you decide to surrender your house and avail taxable debt forgiveness, it is recommended that you talk with a legal professional.

Just like any IRS regulations, there are limits and benefits that could be a trap for an unwary individual. However, if you are actually qualified, this is incredible news for underwater mortgage homeowners.

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