Two major tax provisions survived the “fiscal cliff” (I know I am sick of hearing the phrase too), meaning the housing market is on firmer ground today. Congress did not touch the mortgage interest deduction, and it extended tax relief for one year on mortgage debt forgiveness. Jaret Seiberg of Guggenheim Partners wrote, “An extension of the tax break is positive for home values by reducing the number of foreclosures and helping more troubled borrowers stay in their homes. That means less supply on the market.”
A law signed in 2007 states that loan modifications, short sales and foreclosures were no longer taxable but that tax break expired at the end of 2012. The fear was that if the tax break was not extended, home owners would not agree to short sales because they would then face a tax bill.
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