Mortgage Forgiveness Extended

Posted by Victor Dela Casa

A house is one of the biggest and most rewarding investments of a person's life -- and one that can also prove very expensive and troublesome for some. I remember when I first bought mine in Halifax, the feeling of self accomplishment and fulfillment was so high, I felt invincible financially.

While a select few can afford to purchase a home without having to borrow money from a bank, most Americans must rely on mortgages to finance such an endeavor. With the depletion of the housing market still evident to this day, mortgage payments are difficult for most leaving many people to seek debt relief.

Struggling homeowners may be able to breathe a sigh of relief. As part of the Fiscal Cliff bill enacted by Congress, the Mortgage Forgiveness Relief Act, a debt relief program originally enacted in 2007, has been extended through 2013. The extension promises to help Americans manage financial challenges due, especially, to mortgage debts.

The Mortgage Forgiveness Debt Relief Act of 2007 and its extending amendment allowed the exclusion of income realized as a result of debt reduction on a taxpayer's principal residence. This means that all principal balances unpaid by the homeowner and forgiven by the lender will not be treated as ordinary income. The act states that the amount written off by the lender and any profits received by the seller as a result of selling a house is non-taxable whereas it would've been taxable income if the act was not in effect.

Congress also extended other key programs designed to help qualifying homeowners to afford their mortgages, sell their homes and assist them if they need to relocate. These programs are the Making Homes Affordable, the Home Affordable Foreclosure Alternates and the Homes Affordable Modifications Program. Another, the American Taxpayer Relief Act of 2012, extends the exclusion of capital gains tax on principal residences.

(Originally Published Edward P. Russell Law Office)

About The Author

Victor Dela Casa is a Filipino-Canadian who spent over a decade working as a business professional in Canada. Worked in IT, finance, marketing, international trade, public service, project management and the maritime industry. Degree in Economics from the University of the Philippines and Honours Diploma from Eastern College. Currently based in the Philippines and working as a professional writer for a multi-national business processes firm.