Foster Introduces Legislation To Reduce Burden For Underwater Homeowners
Washington, D.C. – Today, Congressman Bill Foster (IL-11) introduced H.R. 3856, the Homeowners Debt Relief Extension Act. The legislation would reduce the tax burden for underwater homeowners by extending the Mortgage Forgiveness Debt Relief Act of 2007.
“With millions of struggling homeowners still underwater on their mortgages, now is not the time to cut off this tax credit,” said Foster. “We shouldn’t be offering up millions in tax breaks to oil and gas companies, while leaving working families, still struggling to recover from the recession, with a bigger tax bill.”
A recent report showed that a third of Illinois homes are still “deeply underwater,” meaning that more is owned on the mortgage than the home is worth. When homeowners receive loan modifications through their lender, or sell their home for less than they owe, the reduction or cancellation of debt is considered taxable income.
Since 2007, Congress has extended this tax relief to homeowners who have received such modifications, so that they are not liable for taxes on the difference between the house’s value and the loan modification or sale amount. Unfortunately, this tax relief expired December 31, 2013, leaving struggling homeowners under more financial stress.
The Homeowners Debt Relief Extension Act would extend the tax relief for underwater homeowners until January 1, 2016 for debt forgiven after December 31, 2013. These costs would be offset by repealing a break in taxes for oil and gas companies under the Internal Revenue Code’s Section 199. These deductions are no longer necessary for oil and gas companies, which are making billions in profit each year.