Will 2021 continue the Safe Harbor for forgiven debt?
For homeowners who experienced the mixed blessing of completing a short sale in 2020, and had mortgage debt forgiven, the need not include the cancelled debt amount in the income for federal tax purposes. Please read the fine print in an article by Attorney Amy Loftsgordon entitled: Mortgage Forgiveness Tax Break Extended Through 2020. Questions remain: will states disregard the forgiven debt also or will they tax it as income? Will the Biden Administration scrap this exemption for 2021 along with increasing estate taxation and eliminating “stepped up basis” tax protections to heirs who inherit real estate? stay tuned!