Tax break for struggling homeowners set to expire

CNNMoney reports that the Mortgage Forgiveness Debt Relief Act of 2007 is set to expire by the end of this year. If you had a portion of your mortgage forgiven by a foreclosure, short sale, or principal reduction, you may have to start paying income taxes on that portion. “So if you owe $150,000 on your home and it sells for $100,000 in a foreclosure auction, the IRS could tax you on the remaining $50,000. For someone in the 25% tax bracket, that would mean paying $12,500 in taxes on the foreclosure.”

Nothing is set in stone yet though. With the more than 50,000 homeowners going through foreclosure each month and the nearly 500,000 short sales a year, several homeowners could be affected. Jamie Gregory, chief lobbyist for the National Association of Realtors (which support the extension) said, “The hold up is the process. I’m confident it will get done. I just don’t know how.” Well let’s hope so as homeowners are beginning to feel the heat.

What do you think about the extension? Should they extend it? If they miss the deadline what do you think will happen to those affected?

Tell us below in the comments!