Dec 26, 2008

New IRS Tax Policies Designed to Help People Keep Homes -- Too Little, Too Late.

Earlier this week, the IRS announced a new policy designed to help homeowners refinance or sell their homes.

Under this policy, homeowners whose homes are burdened with an IRS lien for unpaid taxes can apply to have this lien made secondary to liens by a lending institution that is refinancing or restructuring a loan. The policy would also allow the IRS to reduce or remove the lien in cases where a short sale is being proposed. These policies would make it easier to obtain loans since the lender's liens would be first in line.

Undoubtedly, this policy will help some homeowners in some situations and that's good, but it should be looked at as just another Band-Aid. Only if a truly systemic program is implemented to address the root causes of the foreclosure morass will the crisis be solved.

It may be that we have a case of Humpty Dumpty here -- everything was fine as long as the real estate bubble continued to expand, but once housing fell off the proverbial wall, nothing can put it back together again.

To learn more about tax policies for homeowners, see Nolo's article Homeowner Tax Breaks: Recent Developments.