Madigan urges Congress to extend tax
relief to struggling homeowners
Extension set to expire in December,
forcing Illinois homeowners to pay taxes on any mortgage relief
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[November 27, 2012]
CHICAGO -- Attorney General Lisa
Madigan joined 41 of her counterparts last week in calling on
Congress to extend tax relief for homeowners who have mortgage debt
canceled or forgiven because of financial hardship or declining home
Under the federal Mortgage Debt Relief Act, in effect since 2007, a
distressed homeowner's mortgage debt that is forgiven after a foreclosure, a
short sale or through a loan modification can be excluded from a taxpayer's
calculation of taxable income. The exclusion, which only applies to mortgage
debt forgiven on primary residences, is set to expire on Dec. 31.
In a letter to U.S. House and Senate leaders, the attorneys general asked to
extend the exclusion for distressed homeowners. The letter noted that allowing
the exclusion to expire would cause homeowners who receive relief under the $25
billion national foreclosure settlement, as well as other mortgage debt relief
programs, to face up to $1.3 billion in tax increases, according to the
Congressional Budget Office.
"Failure to extend this tax relief would hurt the very families we set out to
help in the national foreclosure settlement," Madigan said. "We need to do
everything we can to encourage -- not deter -- struggling homeowners to seek
help to stay in their homes."
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An extension is included in the Family and Business Tax Cut
Certainty Act of 2012 (S.
3521), which recently passed out of the Senate Finance Committee
with bipartisan support.
[Text from file received from the office
Illinois Attorney General Lisa