The Jan. 1 fiscal cliff package included an extension of the Mortgage Forgiveness Debt Relief Act of 2007, which expired Dec. 31.
With the continued tax break, homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from the requirement to report it as income on federal taxes.
The law, which was passed in 2007, was extended one year and now expires Jan. 1, 2014.
“We are pleased Congress passed this extension as part of the fiscal cliff package. This action will continue to make it easier for credit unions to work with distressed homeowners to find outcomes short of foreclosure,” said NAFCU Vice President of Legislative Affairs Brad Thaler.