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Mortgage Debt Forgiveness Act 2017
This bill was Introduced in House on 01/03/2017
Mortgage Debt Tax Forgiveness Act of 2017
This bill sets to amend the (IRS) Internal Revenue Code to set in stone the exclusion from gross income of income attributable to the discharge of qualified principal residence indebtedness. This would greatly help borrowers who need to short sale property’s on their primary residence who otherwise may not be insolvent taxpayers.
What is the Mortgage Debt Relief Act?
General Rules for Debt Forgiveness
If the lender forgives a portion or all of an individual’s debts on a note, the general rule is that the forgiven amount is treated as ordinary income and the borrower will have to pay tax on that amount. Exceptions do apply. Here are a a few: bankruptcy, insolvency and certain other situations, including home mortgage debt (this expired with the mortgage debt relief act in 2016).
The Mortgage Debt Forgiveness Act ran from (January 1, 2007 through Dec 31, 2016) and was extended more than once over the last few years. A borrower can avoid tax liabilities on forgiven primary residence mortgage debt (up to $2 million) as long as the debt is secured by a principal residence and the total amount of the outstanding mortgage does not exceed the original purchase price plus the cost of improvements. These types of circumstances occur when a property is short sold or upside down and foreclosed on. Hopefully they Mortgage Debt Forgiveness Act 2017 is passed!
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