Would exempt taxpaying homeowners from paying IRS on forgiven mortgage debt

U.S. Senator Johnny Isakson, R-Ga., has reintroduced bipartisan legislation to extend a measure aimed at preventing struggling homeowners from being forced to pay federal taxes on forgiven mortgage loan debt.

“The Mortgage Forgiveness Debt Relief Act is a commonsense measure to help taxpayers so they are protected from additional loss following a foreclosure, short sale, or a loan modification that results in debt forgiveness,” said Isakson. “Debt forgiveness of this nature is not real income, and failure to extend this legislation when the nation’s economy has yet to make a full recovery would be unfair to those families who have worked to hold on to their homes.”

If a homeowner is struggling to the point where there is legal action taken to help assist a homeowner with meeting his or her loan obligations, the Mortgage Forgiveness Debt Relief Act, S.122, would prevent the homeowner from being taxed by the Internal Revenue Service (IRS) on income that they never directly received.  

Isakson introduced the legislation with U.S. Sens. Dean Heller, R-N.V., Debbie Stabenow, D-Mich., and Bob Menendez, D-N.J. He previously introduced the legislation in the 114th Congress.