With the expiration of a 2007 tax break, borrowers who've received mortgage relief may find themselves facing hefty tax bills
Borrowers who’ve received mortgage relief from their banks could be facing a big tax bill.
After the housing collapse left millions owing more on their mortgages than their homes were worth, many borrowers worked with their banks to obtain loan amount reductions and save their homes from foreclosure. In 2007, Congress passed a law that kept those borrowers from being taxed on the amount of the loan that was forgiven, according to the Washington Post.
But the tax break expired in December – which means the IRS can count the forgiven debt as income, the Post reported. The new taxes could affect about 2 million homeowners, who would owe an estimated $5.4 billion to the government if Congress fails to renew the tax break.
And it’s by no means clear that Congress will do that. The Senate Finance Committee voted this month to renew the tax break for the 2014 and 2015 tax years, but the provision is part of a larger partisan dispute over tax reform and could die on the Senate floor or in the House, the Post reported.
After the housing collapse left millions owing more on their mortgages than their homes were worth, many borrowers worked with their banks to obtain loan amount reductions and save their homes from foreclosure. In 2007, Congress passed a law that kept those borrowers from being taxed on the amount of the loan that was forgiven, according to the Washington Post.
But the tax break expired in December – which means the IRS can count the forgiven debt as income, the Post reported. The new taxes could affect about 2 million homeowners, who would owe an estimated $5.4 billion to the government if Congress fails to renew the tax break.
And it’s by no means clear that Congress will do that. The Senate Finance Committee voted this month to renew the tax break for the 2014 and 2015 tax years, but the provision is part of a larger partisan dispute over tax reform and could die on the Senate floor or in the House, the Post reported.
