Homeowners who had short sales in 2014 may not be facing massive tax bills after all, after the House of Representatives passed a one-year extension of the Mortgage Debt Forgiveness Act on Wednesday.
According to a report from the Chicago Tribune, the House passed the extension of Mortgage Debt Forgiveness Act, which was included in the Tax Increase Prevention Act of 2014, by a 378-46 margin.
If Congress had failed to act on the renew of the tax breaks, any mortgage forgiveness achieved in a short sale would be counted as income for those whom banks allowed to sell their homes for less than the amount of their mortgage. The average short sale has a mortgage forgiveness of about $75,000.
And according to a recent estimate from RealtyTrac, there have been more than 170,000 short sales representing a mortgage debt forgiveness of $8.1 billion total in the first three quarters of 2014 alone.
But now that the House passed an extension of Mortgage Debt Forgiveness Act, those homeowners may be getting a reprieve.
“I just think it’s unfair and I think most would concur that it’s unfair that individuals would have to pay taxes on income that they have never received,” said Sen. Dean Heller, R-Nev., at a Senate Banking Committee hearing.
Now, the Mortgage Debt Forgiveness Act is on to the Senate, and many homeowners hope that the short sale tax break will be renewed before the new Congressional session begins in January 2015.