Attorney General Jack Conway is joining a national effort by state and territorial attorneys general to urge Congress to extend tax relief for citizens that had mortgage debt canceled or forgiven because of financial hardship or a decline in housing values.
Attorney General Conway was one of 42 attorneys general to sign a letter to U.S. House and Senate leaders asking Congress to extend the exclusion, which has been in effect since 2007 and will otherwise expire on December 31st.
Attorney General Conway stated extension of this tax exclusion is estimated to save taxpayers almost $1.3 billion over two years.
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 and only applies to mortgage debt forgiven on primary residences.
Unless Congress acts, any debt relief provided in 2013 under the National Mortgage Settlement, as well as other mortgage debt relief programs, will likely be considered taxable income.