In Jacksonville, foreclosures have grown rather common. This is a trend that stands true throughout most of the United States. Following the housing crisis of 2008, many people were forced to leave their homes as a result of lost jobs and bills that were just too high for them to manage.
When a foreclosure is approved, it means that part of the unpaid principal on a home is forgiven, clearing responsibility for the homeowners to pay it.
Currently when this happens, the homeowners are not required to pay any income tax on the forgiven principal. This is a benefit that has helped many people cope through the foreclosure process, as it clears them of further financial difficulty and debt. As of the end of this year, this tax relief is coming to an end.
As of January 1st, anyone who goes through with a foreclosure in Florida may be responsible for paying income tax on the money that was forgiven in their name, which would count that forgiven principal as a form of income in certain ways. Opponents of this tax are referring to this as “phantom income,” and there are many in Washington who are working to have the tax relief extended so that those who are not comfortable staying in their homes, but who remain underwater on their mortgage, can make a move that will direct them to a healthier and more financially stable future.