The Mortgage Debt Relief Act has been extended for one year. Since 2007, this law has given homeowners an exemption on federal taxes when they obtain debt forgiveness on their primary home. For example, a family with a short sale for $100,000 less than their mortgage would otherwise have to pay taxes on that difference as if it were income. It also applies when lenders forgive a portion of mortgage principal without the home changing hands.
Without a tax exemption, some homeowners might chose to lose the home to foreclosure instead of facing a large tax bill.
The Mortgage Debt Relief Act will last until Jan. 1, 2014. It only applies to first homes.
"This extension will help struggling homeowners take full advantage of the assistance offered them by the national mortgage settlement and other foreclosure relief programs," Florida Attorney General Pam Bondi stated in a news release. "We need to continue to do everything we can to help Floridians who are doing the best they can to pay their bills and stay in their homes."