[UPDATED] Mortgage Forgiveness Debt Act Extended To 2017

by Peter Thomas Ricci

mortgage-debt-relief-act-nar-housing-taxes

UPDATE: Congress has adjourned for 2016 without extending the Mortgage Forgiveness Debt Act, which will now expire at the end of the year. Read our coverage here for the full story.

As part of a wider piece of tax legislation, Congress has voted to extended the Mortgage Forgiveness Debt Act to 2017.

Originally passed in 2007, the act protects underwater homeowners from incurring tax bills on the debt forgiven during a short sale. Three times now, the act has come close to expiring, but strong lobbying efforts NAR have managed to extend it.

Real Estate Tax Relief

In addition to extending the Mortgage Debt Relief Act, Congress’ tax legislation also included the following measures:

  • A permanent extension of a 15-year cost recovery period for the depreciation of qualified leasehold improvements.
  • The renewal of certain incentives to promote energy efficient commercial and multifamily buildings. Additionally, the legislation extends, for two years, an expired tax credit of between $1,000 and $2,000 for energy-efficient new homes.
  • A permanent extension to rules allowing small–and mid–sized businesses to immediately expense business equipment, rather than depreciate the equipment over several years.
  • Changes to the Foreign Investment in Real Property Tax Act (FIRPTA) that will ease restrictions on investment in commercial real estate.

Tom Salomone, NAR’s president, praised Congressional leaders in a release from the association.

“These tax extenders offer critical support for consumers, homeowners, commercial property investors and small businesses alike,” said Salomone. “A strong economy requires certainty, and this proposal gives a healthy dose of it to millions of American taxpayers.

“We’re grateful for the leadership shown on this important piece of legislation,” he continued, “and look forward to continuing our work in support of homeownership.”

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  • Christy Halderman says:

    Has this actually been extended?

  • Nicole says:

    Does Congress vote officially extend Debt Relief or does the President need to sign this or any other additional steps needed?

  • John Roberts says:

    Does this only cover short sales and work outs does it include foreclosures?

    • John,

      it only includes short sales, because it pertains to the debt forgiven by banks in such sales; with REO transactions, when the bank has completely taken over the home, there is no such debt forgiven.

      • Marcelo Ferreiros says:

        Update Jan. 5, 2015 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

      • Gene says:

        Did Obama sign the Bill? I haven’t heard anything about this and folks are now starting to file taxes.

        • John says:

          My second mortgage holder, Wells Fargo, cancelled my debt because I was unable to pay. I was sent a 1099C yesterday. Would I qualify for this program?

          I was able to modify my first mortgage and still remain in my home.

  • Shelley Stone says:

    There are literally hundreds of articles about the proposed short sale forgiveness extension to 2017 and not one article that it was signed into law by Obama. Can someone please state when it is expected to be signed and if it was signed, confirm that this particular law was extended. Thank you.

  • Cynthia O'Hara says:

    necessary….I’m a Realtor and owners are sill upside down.

  • cokeefe says:

    There is no evidence that this was signed by President Obama. You can check on everything he has signed into law on the white house gov website. If someone has evidence please supply. Likewise, all congressman who have bills out on the Mortgage Forgiveness Debt Relief Act for 2015 extension, do not show any more action taken by Congress.

  • Cyndy says:

    Why is my lender sending me a Cancellation of Debt notice if this was extended?

    • L. King says:

      Is this Act applicable to workouts? i.e. I arranged with my 2nd mortgage company to pay it off at about half of what I owed. They have issued me a tax form for 2015.

  • Pam cox says:

    We did a settlement after our home was foreclosed. The first mortgage was paid and we did a settlement for the ewuity. Would that qualify for the deb t forgiveness act?

  • Bill Malcolm says:

    Does this mean if one refinanced a principal residence mortgage in 2015 and had mortgage debt forgiven in the process that the amount of mortgage debt forgiven is not income for federal income tax purposes?

  • Lila Coo says:

    Has president signed this tax forgiveness bill already or is it only passed by congress? If president has not yet signed, when is he going to sign this bill? Thanks.

  • Janice Mahoney says:

    My house was foreclosed, not short sale, and my equity line was forgiven by Bank of America. Am I still protected under the 2007 Debt Relief Act? I received a 1099A and a cancellation of debit form.

    • Janet says:

      we did a short sale in 2015. I have not received a 1099c from either my first mortgage or my 2nd mortgage (which was entirely discharged) When should these be expected and where can I see the Pres Obama did sign the bill that congress signed in December?
      I can’t do my taxes until these are received.

  • Robert Garcia says:

    I plan short sale my home. I was renting it because I work in a different state. I am 67 soon to be 68. Right now I work in oil industry. Soon hours will be reduced. My renter owes me around $2400 dollars. This has put me in a fix. I am currently on time with my payments. I have a car payment and car insurance bill. Right now I have caught up my bills. I have one combined bill of $ 447.00 per month. I would like to retire soon but I need to sell home on a short sale. If my home sells for less than I owe will I have to pay the difference. I really cannot afford another bill.

  • Linda Hackbardt says:

    The following quote, “The tax extenders deal offers an additional two years of protection covering tax years 2015 and 2016.” was taken from a press release that came out on 12.18.2015 by the president of NAR. Realtors taking short sale listings now probably will close in year 2017. What is the status for year 2017 short sale closings?

    • Linda,

      Thanks for your comment! As with the past couple years, Congress will likely consider a 2017 extension later this year, when it is debating the larger spending bills for the next fiscal year.

  • Jenna guanci says:

    Do deed in lieu of foreclosures qualify for the tax exemption?

  • susan larson says:

    Interested in looking into short sale of our home..zip code 86336

  • Karen Lindquist says:

    Karen-
    My ex-husband is closing on a short sale in next 30 days. I am not listed on any contracts, because I quit claimed home to him after divorce. The bank has forgiven $60,000. This is my ex-husbands primary residency. He bought me out at the time of our divorce and intern I signed a quit claim deed. He was told and documents were signed by the judge and recorded to remove my name off the mortgage in 6 months, that was 2012. Unbeknownst to me, he never did this required step, and proceeded to let the house go into foreclosure, then filed BK and left me holding the bag. In the statement above it states that you will not receive a 1099 or have to add forgiveness to your tax return if the home is primary residence. Again this is his residence, not mine I purchased my own home. Peter do you have any idea how my situation will fit into the short sale forgiveness program? Keep in mind all correspondences have been going to the original home (except I was served the foreclosure papers at my current home). Everything else list me at that address that was sold under short sale.
    can you please advise.
    Thank you

  • jihad salahuddin says:

    I need to have my mortgage debt forgiven

  • Connie Jones says:

    So…if we list someone’s house in 2017 we cannot tell that seller that any “phantom gain” will be forgiven because we won’t know that until toward the end of 2017. The article’s title is confusing because one is led to believe that debt forgiveness extends through 2017 and it is actually referring to former property owners filing tax returns for 2015 and 2016. ( on short sales with “phantom income”)

  • Mark David says:

    Looks like it’s set to expire again unless Congress steps up and does something – while the market has definitely gone in the right direction, there are still millions of homeowners who are suffering and who would benefit from an extension of programs like MFDRA (http://www.arklawgroup.com/blog/why-extending-the-mortgage-forgiveness-debt-relief-act-will-help-to-slow-down-foreclosures) & HAMP (also set to expire at the end of the year). Any thoughts on if an extension is really feasible this late?

  • Patrick says:

    No extension through 2017 yet,only if your short sale was approved in 2016 but settles in 2017. File IRS form 982 for short sales settled in 2016

    • Robb says:

      I NEED this to be extended….I have a short sale offer on me and my ex’s marital home…. and i’ll be damned if I am going to pay taxes on money i never received……
      let them come take it……
      I will NOT sign the short sale paperwork unless this gets extended

      • V Dobson says:

        Will you please send me the reference link or where I can review the bill signed by President Obama that indicates a short sale of a primary residence in March 2015 is not liable for tax penalties on their sold residence? My accountant said we are not eligible. I have searched several sources and have not found anything definitive. Thank you.

  • kelly cook says:

    did the debt forgiveness Act extend to cover all of 2017 or is this now expired?

  • Peter T. says:

    Hello, do you know if Congress will extend the mortgage forgiveness act into 2017?

  • Ellie says:

    Has Congress extended the mortgage forgiveness relief act for 2017?

  • Robert L. Johnson, Jr. says:

    I would like to find out if I qualify for mortgage debt relief on my home. I understand that the debt relief program has been extended to 2018.

  • Dave says:

    when is the termination of the act I’m going thru a short sale noe