Homeowners who had short sales in 2014 will not have to pay taxes on the proceeds of those sales, now that the U.S. Senate has extended the Mortgage Debt Forgiveness Act.
The Senate passed the measure late Tuesday by a vote of 76 to 16. The House of Representatives approved the bill by a vote of 378 to 46 two weeks ago.
The measure next moves on to President Obama for his signature.
The extension applies to any short sale conducted in 2014. If it is to be extended another year, Congress will have to act on it again in 2015.
Had Congress failed to approve the extension, any mortgage forgiveness derived from a short sale would have counted as income.
In a statement, Chris Polychron, president of the National Association of Realtors (NAR), says the tax break package ‘includes important provisions that will help distressed homeowners and commercial property investors with transactions made during 2014. NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment.’
Polychron points out that Realtors ‘strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender in a workout or after their home was sold for less money than was owed.’
The legislation also includes one-year extensions of the 15-year depreciation schedule for leasehold improvements and the deduction for improvements to energy-efficient commercial buildings.