Media reports are noting that legislation passed on Capitol Hill in 2007 that focused on providing desperately needed relief for millions of American homeowners will likely expire at the end of the year.
That is decidedly not good news for many Floridians, who continue to struggle in lingering recessionary times. Although some persons commenting on the imminent demise of the Mortgage Forgiveness Debt Relief Act say that the underlying conditions necessitating the legislation have largely eased across most of the country, that is certainly not true everywhere.
Take Central Florida, for instance, especially the Metro Orlando area. According to Zillow, a prominent online real estate database, about 130,000 mortgaged homes were still recently underwater, meaning that their market value is less than the amount their owners paid for them. Stunningly, that number of homes comprises more than one-third of houses having mortgages in the Orlando area.
The 2007 law focused on helping such strapped homeowners by forgiving the debt on their properties in excess of home values. That arrangement altered the customary understanding that such forgiven debt creates a windfall that can be taxed by the Internal Revenue Service. In other words, it is taxable income.
If the law expires, there will be a reversion to the historical norm, with homeowners having forgiven debt who sell their homes or suffer foreclosure being once again liable for taxes on any forgiven mortgage amount.
That is truly sobering news for a large number of Florida homeowners, especially those who are just digging out from years of financial challenges.
Any person with questions or concerns regarding the law and its status, as well as what it could mean personally, might benefit from a candid and confidential discussion with an experienced bankruptcy and debt relief attorney.
Source: Orlando Sentinel, “‘Underwater’ homeowners likely to face new tax bill,” Mary Shanklin, Dec. 17, 2013
