HARTFORD, CT - Attorney General George Jepsen is once again leading a national effort by state attorneys general who are urging Congress to extend tax relief for consumers who have mortgage debt canceled or forgiven because of financial hardship or a decline in housing values.
For the second year in a row, Jepsen has co-authored a letter with Florida Attorney General Pamela Bondi to ask Congressional leaders to extend the tax relief. After receiving the letter they sent last year, Congress passed a one-year extension of the exclusion through the end of 2013. Unless Congress acts again, however, the tax relief will not extend into 2014.
“I urge Congress to again extend this critical tax exclusion so that the very families that have been able to receive mortgage debt relief are not hit with tax bills they cannot afford,” Attorney General Jepsen said. “Extension of this tax relief is critical to the continued recovery of the housing market.”
Under the federal Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.
“As seen following last year’s National Mortgage Settlement, mortgage modification and debt relief programs have provided real relief to homeowners that are fighting to keep their homes or trying to get back on their feet,” the Attorney General said. “Unless Congress acts again, any debt relief that would be available in 2014 under various mortgage debt relief programs, will likely be considered taxable income and further hinder the economic recovery of those who have already lost so much.”
Assistant Attorneys General Matthew Budzik, department head, and Joseph Chambers, Finance, are assisting the Attorney General with this effort.