The House is Due to Vote Today on Mortgage Tax Relief

House Lawmakers meet today to vote on a bill that would allow homeowners to avoid paying taxes on mortgage debt that the lender reports as a loss on a foreclosure or short sale.

The bill was by Republican Charles Rangel of New York and is expected to receive bipartisan support. As it currently stands when a lender looses money off of selling a house after foreclosure, or when lowering the loan amount due so the borrower can either sell or refinance, the lender reports the loss to the IRS. This amount is considered income to the borrower and is subject to being taxed at a possible 30 percent. Rangle stated that families have enough trouble coping with a foreclosure and should not have to be hit twice with a large tax bill as well.

Foreclosure filings in August more than doubled nationwide from the same period last year and jumped up 36 percent from July. These filings include default noticed, auction sale notices, and bank repossessions. Many of these foreclosures are being caused by people with adjustable rate mortgages that start out with low interest rates and a few years later reset to higher rates.