Law Would Keep IRS from Taxing Foreclosures

The U.S. House Ways and Means Committee is considering a bill that would end the practice of taxing the mortgage debt forgiven in a foreclosure.
NAR: REALTOR® Magazine Online
The U.S. House Ways and Means Committee is considering legislation that would end IRS's practice of classifying mortgage debt forgiven in a foreclosure as taxable income.

Panel Chairman Charles Rangel scheduled a committee vote on the legislation for this Wednesday and spokesman Matthew Beck says the New York Democrat hopes to win broad bipartisan support for the bill.

Since the 1990s, the NATIONAL ASSOCIATION OF REALTORS® has supported efforts to change the so-called "phantom tax" law. "It will relieve a tax burden at a time when an individual has experienced a true economic loss," NAR President Pat V. Combs has said.

The bill also would extend a current tax deduction for mortgage insurance.

Sens. Debbie Stabenow, a Michigan Democrat, and George Voinovich, an Ohio Republican, have sponsored similar legislation in the Senate, but no date has been set for its consideration.