The Mortgage Forgiveness Debt Relief Act extended tax breaks for cancelled mortgage debt through Dec. 31, 2014, according to the Washington Post. The Act, which began in 2007, previously had been set to expire at the end of 2013.
After the House passed bill H.R. 5771, the Senate voted in approval with 76 in favor and 16 opposed, notes National Association of Realtors. H.R. 5771, commonly referred to as the Tax Increase Prevention Act, extended the expiration date for more than 50 tax breaks, including the Mortgage Forgiveness Debt Relief Act, that ended in 2013, explains Forbes. H.R. 5771 retroactively applied the tax breaks to the beginning of the year and extended them through the end of 2014.
The Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude certain cancelled debt on their principal residence from income, according to the Internal Revenue Service. Mortgage debt forgiven in connection with a foreclosure and debt that is reduced through restructuring of the mortgage qualify for the relief. The qualifying cancelled debt is not included on the tax return as taxable income, as is the case with most cancelled debt. Though the cancelled debt eligible under the Mortgage Forgiveness Debt Relief Act is not included as taxable income, the amount must be reported on the tax return on Form 982.