NEW: Kilmartin Applauds Congress for Extending Mortgage Debt Relief
Friday, January 04, 2013
With Congress extending tax relief for homeowners who have mortgage debt canceled or forgiven because of financial hardship or a decline in housing values, Attorney General Kilmartin applauded the move as continued progress to right the housing market in Rhode Island.
“The extension of the Mortgage Debt Relief Act will help homeowners who were negatively impacted by the housing market crash and who have seen some relief through the national Mortgage Settlement avoid an unexpected tax bill at the end of the year,” said Kilmartin. “The mortgage modification and debt relief programs under the national Mortgage Settlement are providing real relief to homeowners fighting to keep their homes and trying to get back on their feet. If Congress had failed to extend this relief, the progress made to help many Rhode Island homeowners would have been cut by higher taxes.”
Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.
Originally written to apply through the end of 2009, the act was extended in 2008 to six years and would have expired Monday if Congress had not acted.
In November, Attorney General Kilmartin along with 42 fellow attorneys general, called on Congress to extend the Mortgage Debt Relief Act.