Massachusetts Attorney General Martha Coakley and a coalition of states have signed a letter pushing Congress to extend the federal Mortgage Forgiveness Tax Relief Act, which expires on Dec. 31.

Under the Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes.

"This tax relief is important not only for families impacted by the foreclosure crisis, but also for continued recovery of our housing market in the Commonwealth," Coakley said in a statement.

Forty-two state and territorial attorneys general signed the letter, which emphasizes the importance of the act to the ongoing housing recovery.

"We’ve made significant headway and seen real results achieved for our citizens through the National Mortgage Settlement and other programs that forgive or cancel mortgage debts through modifications, waivers of foreclosure deficiencies, or short sales," reads the letter. "But this assistance will be less meaningful if the very homeowners that receive mortgage debt relief are hit with tax bills they cannot afford."

An extension for 2014 is included in the Mortgage Forgiveness Tax Relief Act – S. 1187 and H.R. 2788 – both of which are in committee.

Last year, Coakley and 41 other attorneys general in helped persuade Congress to extend these benefits into 2013.