Mortgage debt forgiveness tax break for underwater homeowners expires

TaxesAt the beginning of the year, a tax break that allowed taxpayers to exclude income from mortgage debt cancellation or forgiveness expired, meaning some homeowners could see tax bills increase in 2014.

The tax break, provided in 2007 under the Mortgage Foreclosure Debt Forgiveness Act, allowed underwater homeowners whose lenders had canceled or forgiven part of their mortgage debt to omit the income as non-taxable. The provision allowed for up to $2 million in forgiven debt as part of the exclusion.

According to the National Association of Realtors, which supports an extension of the tax break, Reps. Tom Reed (R-N.Y.) and Charlie Rangel (D-N.Y.) have introduced a bill to extend the tax break for one year, and Sen. Debbie Stabenow (R-Mich.) introduced a measure to extend the measure for two years.