Mortgage Debt Cancellation Relief – Public Law 110-142by Tim Manni
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.