“It was extremely important that Congress was able to come together to make sure families whose homes are underwater don't get hit with a huge new tax bill they don't deserve,” said Stabenow, in the release. “Across Michigan and across the country, many middle-class families are still working to recover from the global financial crisis that sent home values plummeting. If Congress had not included this provision, the housing market could have taken a big hit just as it is starting to turn the corner.”

Gary Thomas, president of the National Association of Realtors, said in the same statement that “Realtors are appreciative of Sen. Stabenow's efforts to secure an extension of tax relief for forgiven mortgage debt. The extension will help many troubled borrowers who were uncertain about their future, and is vital to the nation's recovering housing market and economy.”

Before Stabenow's original bill was signed into law, if a family owed $150,000 on their home but could only sell it for $100,000, and the bank forgives the remaining $50,000 of the mortgage, the IRS treated this $50,000 as taxable income. “That would mean an average middle class family would have to pay an additional $12,500 in income taxes on top of their regular income taxes,” Stabenow said. Stabenow's law “stopped this from happening for five years from 2008 through 2012, but would have expired for 2013 if it had not been extended.”

This article was originally posted at AdvisorOne.com, a sister site of Credit Union Times.