WASHINGTON — A bill offered Tuesday in the House would extend a tax break for homeowners who obtain adjustments on troubled mortgages or complete short sales for their homes.
The measure by Rep. Joe Heck, R-Nev., would continue through 2015 a law that waives taxes on mortgage debt that is forgiven through various forms of loan assistance.
The tax break, which was created in 2007, otherwise expires at the end of this year. Under previous law, the Internal Revenue Service regarded the money saved through loan forgiveness as income and taxed it.
“Struggling homeowners who are underwater cannot afford to be taxed on money they never actually receive,” Heck said “Many of these distressed homeowners are going through refinancing and short sale proceedings because they can no longer afford to stay in their homes.
“This additional tax on shadow income would only prolong their suffering and make it all the more difficult for the Nevada economy and housing market to fully recover,” Heck said.
A similar bill has been introduced in the Senate by Sens. Dean Heller, R-Nev., and Debbie Stabenow, D-Mich.
Gov. Brian Sandoval this week urged Congress to pass the legislation, as Nevada this fall will begin its “Home Means Nevada” program that will offer homeowners a chance to reduce the principal on troubled mortgage loans.
Extending the federal tax break “will ensure those Nevadans are not penalized for their participation in the program,” Sandoval said.
“It simply does not make sense to tax Nevadans for income they never earned, especially when they are already struggling with overwhelming mortgages,” the governor said.
Contact Stephens Washington Bureau Chief Steve Tetreault at firstname.lastname@example.org or 202-783-1760. Follow him on Twitter @STetreaultDC.