Mortgage Debt Forgiveness Act of 2014 was passed by the U.S. Congress in the last minute session as part of a larger bill called the Tax Increase Prevention Act of 2014 which was House Bill H.R. 5771 which passed the U.S. Senate on December 16, 2014, by a vote of 76-16. The bill had already passed the House of Representatives on December 3, 2014. The bill was sent to President Obama for signature into law after the Senate passed the bill.
The Bill provides Mortgage Debt forgiveness for people that s0ld their home in 2014 as a short sale or for people that were foreclosed on in 2014. Without the passage of this bill, the difference between what was owed by the borrower and what was paid to the lender would be counted as income on their Federal Income Taxes for 2014. This is termed “forgiveness” of debt by the creditor and the IRS views this as income. This extension of the mortgage debt forgiveness act allows taxpayers to exclude the forgiven debt from their federal tax returns.