That is right – finally our beloved representatives in Washington DC are trying to get legislation passed to extend the Mortgage Debt Forgiveness Act. Although a bill was introduced over 1 year ago and 9 months before the Mortgage Debt Forgiveness Act expired on January 1, 2014, the Senate is finally considering a bill to extend the Mortgage Debt Forgiveness Act. It is highly expected the bill will make it through the Senate and then it will be up to Congress to pass the bill. Despite the majority of states (42) requesting for the tax break to be extended, the issue has sat idle in the political abyss we call Washington DC. It is a little premature to get excited as this bill is not expected to hit President Obama’s desk until the fall, but most experts agree that the Mortgage Debt Forgiveness Act will be extended for 2 years and made retroactive. What does this mean for you? If you receive a principle reduction or short sale your home prior to January 1, 2016, then you will not have to pay taxes on the forgiven debt. Moreover, the real estate market was coming back strong when the Mortgage Debt Forgiveness Act was available. As soon as the tax break expired our local real estate market came to a screeching halt. Go Figure!
The reality is our local Las Vegas economy and are national economy for that matter is based upon consumer confidence, which is ultimately controlled by real estate values. How can anyone have a bright outlook about your future financial picture if the biggest purchase you will ever make is upside down and you have to climb out of $100,000 hole of negative equity? Unfortunately, the smart decision is to dump your house if you are upside down. Your financial future requires you to make smart business decisions and not emotional ones. If someone could give you $800 a month you would take it. A short sale allows an average person to save $800 per month, but more importantly allows that same person to start building equity instead of making up for negative equity. The Mortgage Debt Forgiveness Act needs to be extended so normal everyday people can be 100% sure they can move forward in life and start making smart financial decisions.