Congress Passes Extension of Short Sale Tax-Break in Year-End Budget
Just before Christmas, Congress passed and the President signed a year-end omnibus budget bill that included over $1 trillion and new spending as well as over $600 billion in tax cuts. Included in those tax cuts was an extension of a tax-break for homeowners relieving them of paying income tax on the difference between what they owe on the mortgage and the amount raised in a short sale – especially if the lender reduces the owed principal amount. The tax-break, which had expired at the end of 2014, was reauthorized and made retroactive for all of 2015 and will cover all of 2016. The forgiven mortgage debt exemption is expected to save homeowners in this situation over $3 billion for tax year 2015 alone. The provision was originally signed into law by President GW Bush as part of the Mortgage Debt Forgiveness Act of 2007. It was supposed to run through 2009 but has been extended several times.
“At least knowing that it is in place next year allows for that stability, which will increase reinvestment for communities,” said Charles Tassell, chief operating officer of the National Real Estate Investors Association (REIA). Tassell said the uncertainty around one-year extensions has made short-sales a less attractive option for struggling homeowners, and National REIA wants to see the waiver extended permanently. “The fact that the Congress has to keep coming back to tell the IRS that forgiving somebody’s mortgage does not equal income is amazing to me,” Tassell said. (as reported in the Scotsman Guide 12/18/15)
Keep in mind, however, that this issue will have to be revisited once again at the end of 2016. NREIA members are encouraged to contact their Congressional representatives and voice their support to make this important tax-exemption permanent.
No Mortgage Tax in the Federal Highway Bill:
In a win for the entire real estate industry, at the end of 2015 Congress passed, and the President signed, a bipartisan 5-year transportation bill that excluded the use of “g-fees” (in essence, a tax on mortgages) – that the Senate had previously inserted as part of its funding mechanisms. National REIA raised concerns about the issue with industry partners and followed it closely. Passage of this bill marks the first time in a decade since a full transportation budget lasting longer than two years.
In case you weren’t paying attention (which we doubt) there’s an important presidential primary election going on this year. However by the time you read this it might all be decided or it might all be in total chaos.
Some important dates to watch:
February 1st, Iowa Caucus;
February 9th, New Hampshire Primary;
March 1st, Super Tuesday;
March 15th, Mini-Super Tuesday.
Stay up to date: To learn more about these and other important issues affecting the real estate investing industry, visit www.RealEstateInvestingToday.com and follow on Twitter @REI2Day