Some struggling homeowners could be faced with a bigger tax bill at the end of the year if one tax break expires.
Banks can sometimes cut families a deal by reducing the principal or forgiving the mortgage balance after a short sale where the seller owes more than the final price. Under traditional IRS law the amount of the debt forgiveness is considered taxable income but the tax break allows these homeowners to avoid paying taxes on the amount.
Now that the break is set to expire, people who take advantage of such debt forgiveness could end up owing big bucks.
Experts believe a return of the tax could damage the ongoing recovery of the housing market.