Tax Break Extension

To the many South Floridians who are desperately trying to sell a home that’s worth less than the mortgage balance, the tax break was the best part of the bailout bill.

If the bill had passsed, homeowners would not we federal income tax on certain mortgage debt that their lender forgives before Jan. 1, 2013. For example, lenders can agree to a “short sale” for an amount that is less than the mortgage. The unpaid debt is forgiven.

Under federal tax law, any forgiven debt is subject to federal income tax. But Congress changed that last year, making an exception to the rule for mortgage debt up to $2 million on a principal residence. The exception covered mortgage debts forgiven in 2007, 2008 and 2009.

The bailout bill would have extended that time period by three years.

The tax break also applies to foreclosures, deed-in-lieu of foreclosures or any loan modification.

So, sorry, no extension applies.

Investors who got caught in this crisis don't get the break either.

And as one commentor on my earlier post noted, the lenders are playing hardball. They don't want to give up on this debt, they're going after your credit and doing anything they can to get repaid. No nice guy tactics in this market.