Foreclosure Victims: The House Bill Gives Tax Relief To Some Victims

Posted in Foreclosure Victims, October 1st, 2007 |

It is shocking but true that till date tax laws prescribed that savings on a foreclosure is taxable income. For instance, if a house with a mortgage of $140,000 is sold for $100,000 then the difference will attract taxes. It is a double slap for foreclosure victims undergoing the trauma of having lost their hearths and homes – robbing them of any chance to stand on their feet once more. A savings of $40,000 means paying $6,000 or $10,000 as taxes – an amount one could ill afford at this point of their lives. To plug this discrepancy the Foreclosure Relief Act was introduced.

The bill was well received by both sides of the net. With foreclosures continuing to be on the rise all are well aware of the impact of such an important measure on the electorate. House Resolution was introduced earlier in September through the House Ways and Means Committee. Most of the provisions have not gone through the final hurdle as yet – but hope is there that it will.

Those whose annual income is more than $100,000, those who have rented out the property in dispute, those with second or vacation houses will not be eligible for the tax relief. Only those who really need it will benefit. The wealthy will not gain from it. It is only for families who live in their houses.

Ohio, topping the list of foreclosures is likely to be most affected by this measure. The number of foreclosures is indicative of its economic health. Manufacturing has been badly affected in this region. Jobs have gone to developing countries where rules are different. The foreclosure points to the larger background of lack of foresight in the country’s trade policies and lending practices as well. The sub-prime category of mortgages is primarily to blame.

Another important factor is that the people are not financially educated and do not know what mortgages actually imply. The language should not be couched in legal jargon but should be more understandable for the common man.

The Senate will vote the Bill on whether another version of it might be considered for review. A Conference Committee will discuss the two versions before being forwarded to the President for enforcement. If all those steps are taken then the bill will come into force including 2007 as the tax year.