Bill Advances to Nix Surprise Foreclosure Tax
The House has approved a bill that would protect homeowners from having to pay taxes when they lose their homes in foreclosure.
The bill, which would be retroactive to Jan. 1, would protect homeowners from having to pay income taxes on forgiven mortgage debt, Bloomberg News reports. The so-called 1099 shortfall results in a tax bill when the value of the house is less than what is owed on the mortgage.
To pay for the tax relief, the bill would curtail a tax break for those who own second homes, the Wall Street Journal reports (sub. req.). Currently up to $500,000 in gains from the sale of a second home can be excluded if a couple used it as a principal residence for at least two of the last five years. The bill would tie the tax break to the number of years it is used as a principal residence.
