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Wed January 8, 2014
Foreclosure Tax Relief Measure Expires
Connecticut officials are campaigning for the extension of a federal tax provision that expired at the end of last year. It's the tax relief provided for distressed families that have to sell their homes at a loss, or who go through a foreclosure.
The amount of the mortgage forgiven in a short sale or foreclosure is regarded as additional income by the IRS. That can mean that families end up owing tens of thousands of dollars in additional taxes after a short sale or foreclosure. A federal tax provision previously exempted that debt, and waived the taxes, but it was allowed to expire last month.
Debra Chamberlain of the Connecticut Association of Realtors said it's a significant hardship. "These families have been hanging on," she told a news conference in Hartford. "They've been hanging on for years, sometimes. And at the point that they finally make the tough choice to sell that house short, or they're unfortunately forced into foreclosure, we're there, holding their hands, and helping them wipe away the tears, and figure where they're going to get the money to move out of the house. The notion that they would then have to pay taxes on money for that shortfall is really unconscionable."
Representatives Joe Courtney and John Larson are co-sponsoring legislation that would extend the debt relief. The effort is also supported by Attorney General George Jepsen.