In recent weeks, calls to NAR have shown some confusion as to whether the tax relief for cancellation of mortgage debt rules remain in effect. The short answer: YES.

The rules were enacted in 2007 and were originally scheduled to expire as of December 31, 2009. The financial system relief package enacted shortly before the 2008 election extended the relief through December 31, 2012. Thus, sellers who satisfy the requirements will continue to receive tax relief when a lender cancels all or some portion of debt associated with the sale of a principal residence.