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April 28th, 2008 (Modified on July 28th, 2008)

Mortgage Debt Cancellation Relief – Public Law 110-142

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Until recently, when any portion of mortgage debt was forgiven, the government viewed it as taxable income that the borrower was responsible for. When Public Law 110-142 passed in December 2007, a borrower is no longer required to pay taxes on the forgiven amount. This program will run between January 1, 2007 and December 31, 2009.

This means no huge tax liability for a homeowner who conducts a short sale, where a home is sold for less than the amount due on the outstanding mortgage against the property. Applying only to principal residences, this law allows all borrowers to receive this relief no matter their annual income. To find out more on insurance deductability, click here.

Did You Know…

The deductibility of mortgage insurance premiums was slated to expire January 1, 2008, but was extended to December 31, 2010. This means that mortgage insurance premiums that homeowners pay for “qualified mortgage insurance” are now deductible as home mortgage interest. The amount deductible is reduced by 10% for every $1,000 over $100,000 recorded in combined gross income, or 10% for every $500 over $50,000 if your filing status is “married filing separately.”

Qualified mortgage insurance is provided by federal agencies such as the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance.

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One Response to “Mortgage Debt Cancellation Relief – Public Law 110-142”

  1. Lynyle Benn Says: October 2nd, 2008 at 5:33 pm

    About a week ago I wanted to get a vehical, They ran my credit and they told me that I have 40,000 mortagage forcloser. So I look into it then they told me that I signed up for some timeshare, which I don’t recall In Hawaii which I never been there. So I need help to clear my dedit. I would like to talk to someone.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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