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Tax exclusions for loan modification and other debt forgiveness

The recent mortgage crisis was devastating for many Florida residents and others around the country. Homeowners in financial straits often had difficulties making house payments in a timely manner. In many instances, those struggling financially were faced with a loan modification, foreclosure or short sale. Consumers were allowed to deduct these forms of mortgage debt forgiveness on their taxes. Industry advocates are hoping to make this tax exclusion permanent.

The long-term impact of the new Tax Cuts and Jobs Act remains to be seen as many of the provisions are now being implemented. Recently, the National Association of Realtors sent members to speak to the House Ways and Means Subcommittee on Tax Policy. The NAR representatives are arguing that a 2007 policy regarding tax relief for mortgage forgiveness be made permanent. Their contention is that if homeowners who are already having problems paying their mortgages have to pay taxes on the cancelled debt, an undue burden falls on them.

Experts acknowledge that when someone sells a home for a profit, they benefit from the capital gains tax guidelines. Proponents of the permanent tax exclusion hope to have the policies be fair to those who may be in need of financial help. Representatives from NAR believe that communities, neighborhoods and families will ultimately benefit from making the tax exclusion permanent.

Though the economy continues to strengthen, some Florida families may still be in difficult financial situations. To prevent losing a home, a loan modification may be a viable solution. A knowledgeable bankruptcy attorney can discuss this option along with others to develop the best path forward. A respected lawyer will help clients fight to remain in their homes and get their finances back on track.

Source: dsnews.com, "Making Mortgage Forgiveness Tax Relief Permanent", David Wharton, March 15, 2018

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