The Mortgage Debt Relief Act has been extended for one year, until December 31, 2013. The law gives homeowners an exemption on federal taxes when they obtain debt forgiveness on their primary home. For example, a homeowner who owes $250,000 on the mortgage and short sells for $200,000 would have been taxed on the $50,000 difference as income. By extending the Mortgage Debt Relief Act, homeowners will not have to pay income tax on mortgage debt forgiven up to two million dollars. Check with your tax professional as not all mortgage debt is subject to the Mortgage Forgiveness Debt Relief Act.
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