December 20,2007

Mortgage Tax Relief Bill Signed Into Law

Finance Chairman championed bill to offer help to families caught in the sub-prime mortgage crisis

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) today hailed the signature of the Mortgage Forgiveness Debt Relief Act of 2007 into law. This legislation offers tax relief to American families caught in the sub-prime mortgage crisis. When debt is forgiven on a home loan, the homeowner must normally count that debt forgiveness as income and pay taxes on it. The mortgage tax relief bill creates a threeyear exception for debt forgiveness on home loans – helping families already unable to meet their mortgages to avoid incurring large tax bills as well. It also extends a provision allowing homeowners to deduct mortgage insurance payments from their taxable income. The Senate approved a Baucus amendment to the House-passed bill, H.R. 3648, on December 18.

“This bill reaches out a helping hand to the millions of American families struggling to pay their bills in the wake of the sub-prime mortgage crisis,” Baucus said. “This timely tax relief will help families save money, and get their financial feet back under them. Congress needs to do more to examine the causes of the sub-prime mortgage crisis and to protect Americans seeking the dream of home ownership.”

In addition to tax relief for debt forgiveness and mortgage insurance payments, the bill includes:

  • Tax relief for volunteer firefighters and emergency medical technicians
  • Help to expand housing options for college students with children
  • Protection of tax relief for homeowners after the death of a spouse
  • Flexibility to help co-op tenant/owners deduct real estate taxes and mortgage insurance

The bill is fully offset by increased penalties for failure to file S corporation returns or partnership returns, and new requirements for the payment of corporate estimated taxes.

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