Mortgage Cancellation Relief

For homeowners finding themselves in a situation where they must sell their house for less than they owe, there is some good news.

On October 4, 2007 - The House has agreed to legislation that would provide tax relief when lenders forgive some portion of a mortgage debt. The vote was 386 - 27. Under current law, forgiven mortgage debt is treated as taxable income and taxed at ordinary income rates. The legislation would provide a permanent rule that eliminates the requirement to pay tax on forgiven mortgage debt on a principal residence, up to $2 million. There is no income restriction on those who are eligible for the relief. The revenue estimate for the provision is $1.4 Billion over 10 years. A "pay-for" has been identified that will tighten, but not eliminate, a benefit of current law.

Have any questions? You can contact me at lcartolano@apr.com or at 510.213.1139