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Ease Foreclosures with Tax Exclusion (Rep. Tim Bishop)

by N.Y. Dem. Rep. Tim Bishop - 09/28/07 6:00 AM ET

I am pleased to be the lead cosponsor of the Foreclosure Tax Relief Act, which would give a tax break to middle-class homeowners who’ve been caught up in the subprime mortgage fallout.

Nearly 3,000 homeowners in Suffolk County, New York alone – that’s one out of every 180 homes in my district – have joined 2.2 million families nationwide whose subprime loans have already failed or will end in foreclosure. Adding insult to injury, they face massive tax bills once any portion of their mortgage is canceled. The IRS treats that forgiven debt as income, and can even tack on interest and penalties.

In response to this unfair, phantom tax, the Foreclosure Tax Relief Act would set the tax exclusion for middle-class families up to $50,000 in forgiven debt on first mortgages and primary residences.

Families who lose their homes should be spared any further penalty by the IRS. Losing your home is tough enough. The last thing any family facing foreclosure needs is for the IRS to kick them when they’re down.