Will Mortgage Forgiveness Debt Relief Act be Renewed for 2014?

Best tax attorneys in Denver can help with mortgage forgiveness debt relief

Gantenbein Law Firm’s tax and foreclosure defense attorneys can help with your mortgage forgiveness. 303-618-2122. http://www.gantenbeinlaw.com

Homeowners are on edge, hoping Congress will once again renew the Mortgage Forgiveness Debt Relief Act (MFDRA) that expired last December 31, 2013. Anxious homeowners are waiting for Congress to renew the Act for 2014. Senate Majority Leader Harry Reid (D-Nev) said earlier this year he was waiting until after the November elections to vote on the measure. The measure has bi-partisan support and a fairly good chance at passing but there is some opposition to renewing.

Congress first enacted the MFDRA in 2007 as an exception to the tax codes to help distressed homeowners. The housing collapse and plunging home prices left millions of people owing more on their homes than they were worth – their homes were “underwater”.

The Urban Institute recently published an analysis stating that approximately 2 million homeowners will be at risk of incurring a tax liability for 2014 if the MFDRA is not renewed.

Under current federal tax law, when homeowners accept a reduction in payment, a short sale, loan modification or are forgiven a portion of their mortgage, the amount forgiven is reported as income to the IRS. The homeowner will receive an IRS Form 1099-C. For instance, if a homeowner owes $200,000 on their mortgage and $100,000 of that is forgiven, the homeowner will receive the IRS Form 1099-C showing the amount of debt forgiven and the fair market value of any property foreclosed. On a $100,000 debt, the homeowner would have to pay $28,000 in taxes even though the borrower never received a penny of actual money (the $100,000 “income”).

There are hundreds of thousands of underwater homeowners who would have huge tax burdens for 2014 if the Senate doesn’t renew the MFDRA. In the past, Congress renewed the MFDRA retroactively for the year. The bill now sitting in the Senate, and if passed, will renew the MFDRA through December 2015.

Bank of America borrowers have a little protection. In the BOA August 2014 settlement, $490 million was set aside to help defray a portion of borrower’s tax bills if Congress failed to renew the act.

Under the MFDRA, a homeowner may be able to exclude up to $2 million of debt forgiven on a principal residence. The limit is $1 million for a married person filing a separate return. The debt forgiven on second homes, rental property, business property, credit cards or car loans do not quality for the MFDRA, although there are some cases where other tax provisions may be applicable. Consulting a qualified tax attorney will help the homeowner with other possible options.

If you are a homeowner and need assistance with your mortgage forgiveness, contact the Gantenbein Law Firm at 303-618-2122. We have the best tax and foreclosure attorneys – we are dedicated to our clients and provide the highest quality legal services. Gantenbein law firm is in Denver and serves all of Colorado.

Our top tax law attorney is also a skilled, efficient Denver tax audit lawyer, helping his clients with alternative resolutions to tax audits and tax debt relief. Gantenbein Law Firm’s Denver tax attorney expertly assists his clients with complicated tax issues, including business formation and corporate taxes, tax appeals, tax deficiencies, tax litigation, tax repayment plans, estate taxes, tax audit defense services, and more.

Denver tax attorney Tyler Murray, LL.M., of the Gantenbein Law Firm, is an experienced, licensed tax attorney with his Masters in Tax Law. If you have federal or state tax issues, contact premier IRS lawyer Tyler Murray at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you. Visit our Denver Tax Law Firm  website for more information.

Gantenbein Law Firm practice also includes Colorado Foreclosure Defense, Colorado Real Estate Law, Colorado Business Formation & Representation and  Colorado Family Law. This combination is exceptional in that it provides our clients a complete and full perspective of the most common issues surrounding your unique assets or tax issues- such as mortgage forgiveness and its debt relief tax implications. For more information on these areas of practice, visit Gantenbein Law Firm’s website.

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About theglawfirm1

Gantenbein Law Firm is a Denver, Colorado Tax Law Firm, servicing all of Colorado. Gantenbein Law Firm also specializes in Colorado Real Estate Law, Colorado Foreclosure Defense, Wills & Trusts, and Business Law.
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