(PRWEB) October 09, 2012

As reported earlier this year by The Baltimore Sun on June 20th, unless Congress grants an extension, a law created in 2007 to help troubled homeowners expires at the end of this year. It allows them to avoid paying taxes on forgiven debt for their primary residences. As of this date, Congress has failed to take any action which could leave many sellers facing a daunting tax bill in 2013. If, for example, a lender wipes away a $ 100,000 debt in a short sale or finalizes a foreclosure on a delinquent homeowner, the typical borrower could owe more than $ 25,000 in taxes.

In recent years, most underwater homeowners who lost property to foreclosure or short sales were excused from having to pay taxes on this income, thanks to the Mortgage Debt Relief Act of 2007. The current law states that homeowners dont have to include forgiven debt as income provided:

1.