Tax Article -Mortgage Relief

Congress spent much of 2007 trying to hammer out legislation that would offer help to homeowners caught in the sub prime mortgage crisis. The Mortgage Forgiveness Debt Relief Act of 2007, signed into law by President Bush on Dec. 20, 2007, creates a three-year exception (from Jan. 1, 2007, through Dec. 31, 2009) to current law so that affected homeowners won’t have to pay federal income taxes for debt forgiveness on their troubled loans. This provides relief to homeowners who receive debt forgiveness in a foreclosure or in a mortgage workout, under which the terms of the mortgage are changed, resulting in a lower mortgage balance.

The law specifically applies to mortgages on a principal residence, and not to vacation or secondary homes or on certain home equity loans. The law also doesn’t apply to taxpayers in Chapter 11 bankruptcy.

Find out how our expertise in Tax Services can add value to your business. Email us or call us at 1 (888) 875-9770.

Moreover, the new law extends through Dec. 31, 2010, a provision enacted in 2006 that allows taxpayers to take an itemized deduction for premiums paid or accrued on qualified mortgage insurance. The law applies only to contracts entered into after Dec. 31, 2006, and before Jan. 1, 2011.

Another provision of the mortgage act extends the time period that a recently widowed person can use the joint-return filers’ $500,000 home sale gain exclusion to cover sales occurring up to two years after the spouse’s death. Plus, the act clarifies the low-income housing credit and the definition of a cooperative housing corporation.

related links

International Tax Services

Newsletters and Articles

Wealth Management

Track your Refund

Tax Rates

Tax Tools and Calculators

Resources