Homestead Exemption on Forgiven Debt Set to Expire This Month

The Mortgage Forgiveness Debt Relief Act is scheduled to expire at the end of the month. The IRS considers forgiven debt income, which means a person with a deficiency balance that is waived can be held responsible for income taxes on the amount of debt that has been forgiven. There is currently a rule that gives an exemption on this income tax for a person’s primary residence. This exemption will expire at the end of this month if congress does not act to extend it. If you are a real estate agent or investor specializing in short sales, the expiration of this exemption could have a significant impact on your business… it may be worth the few minutes to give your congressman a call to voice your opinion.