Last Tuesday, Congressman Bill Foster introduced a bill aimed to extend the mortgage debt tax exemption, which expired on December 31st, 2013. The bill is known as the Homeowners Debt Relief Extension Act (H.R. 3856).

Before the original bill expired in December, the Mortgage Debt Relief Act of 2007 enabled homeowners to exempt debt from their taxes that was a result of a foreclosure or short sale. In order to qualify for this deduction, borrowers must meet other criteria such as the property being a primary residence and the claim does not exceed $2 million.

Since 2007, homeowners have not had to pay the taxes owed on the difference between the home's value and the loan modification or the amount of a foreclosure or short sale. Since the exemption expired in December, no extension has been passed.

If Foster's bill is passed, it would extend tax relief until January 2016 for any debt forgiven after the previous bill expired on December 31st, 2013.Foster believes these tax breaks are very important to the economy since millions of homeowners remain underwater.

If the bill is passed, the costs will be offset by repealing a tax break in the Internal Revenue Code's Section 199 for oil and gas companies. With the billions of dollars that oil and gas companies are making each year, an offset would be better suited for struggling homeowners.