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President Signs Mortgage Debt Relief Bill

Categories Tax Tips (Fed)

On December 20, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007 [HR 3648]. The legislation is aimed to help homeowners who are facing foreclosure on their principal residence.

The new law excludes from income the cancellation of up to $2 million in debt related to any discharge of qualified acquisition indebtedness on the taxpayer’s principal residence. It includes refinancing of debt to the extent the amount of the refinancing doesn’t exceed the amount of the refinanced indebtedness. The exclusion from income is effective for debts discharged on or after January 1, 2007 and before January 1, 2010.

Other notable changes include:

– Extending the deduction for mortgage insurance premiums

– Easing the home sale exclusion rules for surviving spouses

– Adding and increasing penalties imposed on S corporations and partnerships for failing to file required returns.

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