A tax exemption for struggling homeowners could expire at the end of this year.
The Mortgage Forgiveness Debt Relief Act was first implemented in 2007. It keeps the I-R-S from taxing mortgage debt a lender forgives.
According to Realty Trac, 31 percent of Georgia property owners owe more on their loans than their property is worth. That's more than 268 thousand mortgages.
Robin Lance with the Georgia Association of Realtors says many homeowners facing short sale won’t be able to pay the tax.
“So they’re not even possibly going to be able to get out of that home sale through a short sale and be able to repurchase in the next few years if they’re being crippled with a tax lien.” she says.
Realty Trac says the average Georgia homeowner would have to pay taxes on more than 85 thousand dollars of forgiven debt.
Jamie Gregory with the National Association of Realtors, says if Congress doesn’t extend the Act, more homeowners will lose their homes.
“If they knew that there may be a tax bill hanging over their head, they may say ‘Just walk away from the property and let it go into foreclosure and give it back to the lender.’ Instead of trying to pursue a short sale, which would be better for everybody. Better for the lender, better for the community and actually better for the homeowner.”he says.
Gregory says the Mortgage Forgiveness Debt Relief Act is set to expire December 31st. He says lawmakers are obviously preoccupied with trying to resolve the budget crisis regarding the fiscal cliff. He doesn't believe they will focus on this tax exemption until that issue has been resolved. But he is optimistic Congress will eventually extend the exemption. But he's worried what may happen to homeowners facing foreclosure in the meantime.