Now this is the last thing that struggling homeowners want to hear: getting mortgage relief and having tax liability from the mortgage relief! Thanks Congress for not doing your job!
The Washington Post highlights the seriousness of this issue.
In 2007, Congress adopted a law that spared homeowners from being taxed on the amount of the loan that was written off. But that tax break expired in December, and now that kind of relief can be counted as income by the Internal Revenue Service.
“That’s why the Department secured a commitment from Bank of America to pay a portion of the settlement – over $490 million – to defray some of this tax liability,” U.S. Attorney General Eric Holder said. “And our settlement requires the bank to notify all consumers of the potential tax liability.”
Holder went on to warn that unless Congress acts, “the hundreds of thousands of consumers we have sought to help through our settlements with JPMorgan Chase, Citigroup, and now Bank of America, may see a significant tax bill just as they are beginning to see the light at the end of a dark financial tunnel.”