Senator Stabenow’s Bill to Protect Homeowners from Higher Taxes Passes Senate
Legislation Protects Homeowners from Being Hit with Extra Tax BillFriday, December 18, 2015
U.S. Senator Debbie Stabenow, a senior member of the Senate Finance Committee, today applauded the inclusion of her legislation to protect struggling homeowners from being hit with an extra tax bill in the end-of-year spending bill. The bill, which will fund the government through 2016, includes Senator Stabenow’s Mortgage Forgiveness Tax Relief Act. The Mortgage Forgiveness Tax Relief Act makes sure homeowners aren’t required to pay additional taxes when they receive mortgage principal forgiveness on their homes or sell their homes in what are commonly called "short sales." Senator Stabenow led the effort to include her bill in the end-of-year deal, which will go to the President’s desk for his signature.
“So many families across the country, including many in Michigan, are faced with having to pay for mortgages that now exceed the value of their home,” said Senator Stabenow. “The passage of this bipartisan agreement means that families who are willing to work with their lenders will not be forced to pay hundreds or even thousands of dollars in additional income tax when they sell their home.”
The end-of-year deal extends through 2016 legislation originally authored by Senator Stabenow in 2007. Senator Stabenow led the effort last Congress to extend this provision in the Tax Increase Prevention Act, which extended the tax break through 2014. This bill will also add additional protections authored by Senator Stabenow to ensure that homeowners are eligible for relief as long as the agreement to reduce their mortgage debt is in writing before the date the provision expires.
Declining home prices and rising foreclosure rates have forced many families to sell their homes for less than they paid for them, and sometimes for less than the outstanding debt. The IRS previously taxed any loan forgiveness provided to homeowners as "income," meaning families were paying thousands of dollars in income tax for phantom income that wasn't actual money the family had earned.
While the housing market is recovering, short sales and foreclosures continue. More than one in six American homeowners currently have mortgages that are underwater.
Next Article Previous Article