Recently my broker invited the lobbyist for the Nevada Association of Realtors to speak at our office. He had just returned from Washington, D.C. and one of the topics he discussed was the status of the extension of the Mortgage Relief Act, originally enacted in 2007 by President Bush, and extended twice since, which expired on December 31, 2013. This bill allowed the forgiveness of debt on primary residences, which is a taxable event, to be waived for the homeowner. Currently, if a primary residence is sold in a short sale or is foreclosed on by the lender, a 1099 will be issued to the homeowner for the difference between what the house was sold and the amount of indebtedness. On a debt forgiveness of $100,000, a taxpayer in the 25 percent tax bracket could face a one time tax bill of $25,000. The waiver had previously been extended for one year, through December 31, 2013.
While all of Nevada’s congressional delegation supports a two year extension, it is not viewed with as much urgency in other parts of the country. Senator Max Baucus had previously opposed any extensions in favor of comprehensive tax reform. He has just been confirmed as the ambassador to China, however, so Senator Harry Reid will most likely attach the extension to another bill. The chair of the House Ways and Means committee, Dave Camp of Michigan, who is not running for reelection, also supports comprehensive tax return and will not consider any extensions. (Altogether, 900 extenders expired on December 31, 2013.) While opinion seems to support an extension of the Mortgage Relief Act, retroactive to January 1, 2014, it will probably only be for one year and there will be no more extensions.
If you think you may need to sell your home and owe more than the current value, contact us to discuss your options.