Mortgage Forgiveness Debt Relief Act of 2007 Signed Into Law
Filed under: Loans, Real Estate Investing
The Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) was officially signed into law yesterday, December 20th, 2007, by President Bush. The main objective of this bill was to amend the Internal Revenue Code of 1986 to exclude discharges of indebtedness on principal residences from gross income.
If your lender forgives a portion of the debt owed on your principal residence, like what happens in a shot sale, the amount forgiven will not be considered income, whereas before you would have had to pay income tax on any amount forgiven by the lender. The Mortgage Forgiveness Debt Relief Act of 2007 will also reduce the income tax breaks on most gains from the sales of non-primary residences using a formula based on the amount of time that the taxpayer actually lived in the property during the five-year period before the sale.
