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 January 18, 2008

Mortgage Forgiveness Debt Relief Act of 2007
The Feds are reporting on the recent tax breaks President Bush signed off on, which will help those homeowners in mortgage crisis. Previously, debts forgiven by the lenders, for example, short sales, or refinancing were taxable to the one who borrowed the money as debt discharge income. With the Forgiveness Debt Relief Act of 2007, the taxpayer no longer has to pay income tax on the forgiven debt on loans which were secured by a principal residence.
The breaks apply to discharged debts between Jan 1, 2007 to Dec. 31, 2009. To calculate capital gains, those debts that have been discharged excluding income need to be subtracted from the "basis of the taxpayer's principal residence" (not lower than zero). Taxpayers could leave out from capital gains up to $250,000, or $500,000 for married couples who will be filing jointly, toward properties which are owned and used as a primary residence for a minimum of two of the last five years.

This blog is reporting on news and should not be taken as advice. Please consult your accountant or tax attorney when applying the new bill to your taxes.

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