The President is expected to sign into law the “Mortgage Forgiveness Debt Relief Act of 2007.” The act was sent on to the President after passage by Congress on December 18th.
Under the Mortgage Relief Act, effective for indebtedness discharged on or after Jan. 1, 2007 and before Jan. 1, 2010, taxpayers generally may exclude from income up to $2 million of mortgage debt forgiveness on their principal residence.
The Mortgage Relief Act also includes the following important tax changes not connected to mortgage debt tax relief:
o A three year extension of the rule treating qualifying mortgage insurance premiums as deductible qualified residence interest.
o An exclusion for qualified state or local tax benefits (e.g., reduction or rebate of state or local income or property tax) and qualified payments (up to $360 a year) granted to members of a qualified volunteer emergency response organization. The new exclusion will apply for tax years beginning after 2007 and before 2011.
o Effective for sales and exchanges after Dec. 31, 2007, surviving single spouses will qualify for the $500,000 home-sale exclusion if the sale occurs not later than 2 years after their spouse's death and the requirements for the $500,000 exclusion were met immediately before the spouse's death. Currently, the up-to-$500,000 exclusion is available only if spouses file a joint return for the year of sale. READ ON->
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