Tax relief granted for forgiven debt, private mortgage insurance
Bush administration allows three-year window
Friday, December 21, 2007
By Matt Carter
Inman NewsPresident Bush signed into law Thursday a bill creating a temporary tax break for homeowners who are able to persuade lenders to forgive part of their debt, and extends a tax deduction for some families with private mortgage insurance.
For the next three years, the IRS won't count as income debt forgiven by lenders when troubled borrowers negotiate short sales or workouts on their primary residence that involve forgiveness of part of their debt.
HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, also extends for three years a tax deduction allowing families earning $109,000 or less to deduct all or part their private mortgage insurance premiums from their taxable income -- which could save them an average of $350 a year.
In signing the bill, Bush
said that not counting forgiven debt as income for tax purposes "will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
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