Mortgage Forgiveness Debt Relief Act is due to expire within the next 10 months. As per this act, the mortgage borrowers won't be subject to the payment of federal income taxes if there property went through loan modification, short sale or foreclosure. A large number of people were hoping that as the government is taking various steps to help the mortgage borrowers, it may also extent the Mortgage Forgiveness Debt Relief Act. But till now, nothing positive has been reported in this regard.
As per the act, which will expire on December 31st, 2012, the homeowners were able to avoid taxation on forgiven mortgage amounts ranging up to $2 million if married and filing jointly. In case of single filers, borrowers can avoid paying taxes on mortgage amount up to $1 million. In order to take advantage of this act, the homeowner's mortgage must be cancelled by a lender through loan modification, short sale, deed-in-lieu of foreclosure or foreclosure and process should be completed by December 31st, 2012.
It has been noted that the government may not renew the Mortgage Forgiveness Debt Relief Act. It has to be noted here that it will be an uphill task in order to make the government consider the request to renew the Mortgage Forgiveness Debt Relief Act. If the government does not consider extending the act, then it will make things difficult for quite a large number of people.
That imminent deadline and the fact that the Congress won't extend the act any further has real-estate professionals and tax planners on edge for the last few months. Thus, anyone who is thinking of short sale or going for loan modification should do it now in order to take advantage of the Mortgage Forgiveness Debt Relief Act as it might take 4 to 12 months time to complete the whole transaction.