Make us your home page
Instagram

Tax break for forgiven mortgage debt extended

ST. PETERSBURG — When the year ended, retired air traffic controller Brad Bates and his wife had been resigned to their fate: a tax-bill jump of about $25,000 due to the potential sale of their underwater home.

A crucial tax break for forgiven mortgage debt had expired Dec. 31, meaning they would owe taxes on the money they didn't pay toward their loan, likely pushing the couple into bankruptcy.

But tucked in the New Year's Day deal that dodged the fiscal cliff was a late Christmas present: an extension for the break until the end of 2013.

If the Bates' home, which is now under contract, sells before year's end, the couple will owe nothing extra to Uncle Sam.

"That's terrific," Bates said. "Maybe 2013 is going to be a much better year."

Homeowners facing short sales, reduced loan principals or foreclosures can breathe easier after the 2007 tax break was extended late Tuesday in a bipartisan vote.

The extension will allow homeowners this year to avoid paying taxes on any money scrubbed from their debt to the bank.

Florida short sales in recent months have sold on average for about $103,000 less than what the homeowner owed, according to data firm RealtyTrac. Without an extension, a home seller in a 25 percent tax bracket would have owed $25,725 more to the IRS.

Real estate agents and experts had hoped the tax break, passed in 2007 as the foreclosure crisis worsened, would be extended. But as the clock ticked closer to the deadline, many short sellers scrambled to close their deals out quick or face the consequences.

"My full anticipation was that it was going to get done," said Keller Williams agent Steve Capen. "No one on either party wanted to take responsibility for not extending it."

The relieved debt would have been taxed as income.

The one-year extension will save American taxpayers $1.3 billion, according to the Joint Committee on Taxation.

The fiscal cliff bill, which averted a bundle of steep tax hikes and spending cuts, included several other extensions affecting homeowners. A tax deduction for mortgage insurance premiums for homeowners earning less than $110,000 a year and a tax credit of up to $500 for energy-efficiency improvements will last through 2013.

The debt-relief tax break could face further challenges as budget battles continue in Congress or when its deadline nears later this year.

But in the meantime, agents hope the extension will convince reluctant homeowners to sell their homes without fear of a crippling tax hit.

"It'll be good to get people off the fence," Capen said, "to get moving and get the market corrected."

Drew Harwell can be reached at dharwell@tampabay.com or (727) 893-8252.

Tax break for forgiven mortgage debt extended 01/02/13 [Last modified: Wednesday, January 2, 2013 10:38pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Memorial Day sales not enough to draw shoppers to Tampa Bay malls

    Retail

    TAMPA — Memorial Day sales at Tampa Bay area malls were not enough to compete with the beach and backyard barbecues this holiday weekend.

    Memorial Day sales weren't enough to draw shoppers to Tampa Bay area malls over the long weekend. 
[JUSTINE GRIFFIN | Times]
  2. Austin software company acquires second Tampa business

    Corporate

    Austin, Tex.-based Asure Software acquired Tampa's Compass HRM Inc. late last week for $6 million. Compass focuses on HR and payroll.

    [Company photo]
  3. Hackers hide cyberattacks in social media posts

    Business

    SAN FRANCISCO — It took only one attempt for Russian hackers to make their way into the computer of a Pentagon official. But the attack didn't come through an email or a file buried within a seemingly innocuous document.

    Jay Kaplan and Mark Kuhr, former NSA employees and co-founders of Synack, a cybersecurity company, in their office in Palo Alto, Calif., in 2013. While last year's hacking of senior Democratic Party officials raised awareness of the damage caused if just a handful of employees click on the wrong emails, few people realize that a message on Twitter or Facebook could give an attacker similar access to their system. 
[New York Times file photo]
  4. Big rents and changing tastes drive dives off St. Pete's 600 block

    Music & Concerts

    ST. PETERSBURG — Kendra Marolf was behind the lobby bar of the State Theatre, pouring vodka sodas for a weeknight crowd packed tight for Bishop Briggs, the latest alternative artist to sell out her club.

    Sam Picciano, 25, left, of Tampa and Molly Cord 24, Palm Harbor shop for record albums for a friend at Daddy Kool Records located on the 600 block of Central Avenue in St. Petersburg, Florida on Saturday, May 20, 2017. OCTAVIO JONES   |   Times
  5. How Hollywood is giving its biggest stars digital facelifts

    Business

    LOS ANGELES — Johnny Depp is 53 years old but he doesn't look a day over 26 in the new "Pirates of the Caribbean" movie — at least for a few moments. There was no plastic surgeon involved, heavy makeup or archival footage used to take the actor back to his boyish "Cry Baby" face, however. It's all …

    This combination of photos released by Disney, shows the character Jack Sparrow at two stages of his life in "Pirates of the Caribbean: Dead Men Tell No Tales."  Johnny Depp, who portrays the character, is the latest mega-star to get the drastic de-aging treatment on screen
[Disney via Associated Press]