Congress is back in session to grapple with the consequences the country will face if the fiscal cliff is not avoided. As reported in the Washington Post, their actions could affect millions of homeowners and buyers. Their discussion includes mortgage-debt forgiveness; tax benefits such as mortgage interest, property taxes, and home-sale capital gains exclusions; and energy-conservation and mortgage insurance premium deductions. As reported,
Renewal of the mortgage debt forgiveness legislation may well be the most time-sensitive issue affecting homeowners during the lame-duck session. If it expires at the end of the year, owners who receive principal reductions through loan modifications, short sales or foreclosures by lenders next year could face painful tax bills: The IRS would treat their debt cancellations as ordinary taxable income.
The fiscal cliff would also have a major impact on county governments who rely on grant funding from federal programs. Community Development Block Grants, USDA Rural Development programs, and FEMA State & Local Disaster Preparedness & Recovery Programs could be cut if Congress fails to act. For more on that topic, see our recent posts,