Congress and President Trump Surprise Homeowners with Extension of Tax Benefits for Loan Forgiveness Income Through 2017
Unexpected good news for many homeowners! As we had mentioned in previous blog posts, the Mortgage Debt Relief Forgiveness Act of 2007 had been extended through December 31, 2016 by the Obama administration. Recently, Congress passed the Bipartisan Budget Act of 2018, which retroactively extended certain provisions even further through December 31, 2017.
Some of the extensions include the tax deduction for Private Mortgage Insurance, the Tuition and Fees Deduction, and the Discharge of Debt on Qualified Principal Residence. There are also other incentives and credits that have been extended, which can be seen here.
As of 2007, taxpayers could exclude up to $2 million on their primary residence of the debt discharged on their foreclosed homes. This exclusion originally expired at the end of 2016, where this amount could no longer be reduced from an individual’s taxable income. Although Congress usually addresses this issue earlier in the year, they have officially granted this extension through the end of 2017. Better late than never!
This is great news for homeowners who had to take an alternative path and work out either a short sale, foreclosure, or deed in lieu of a waiver of deficiency with their respective bank and with the help of a real estate attorney.
Since most folks have not yet filed their 2017 tax returns, there is still time to take advantage of this credit! Fortunately, if you have already filed your taxes for the year, you will still have the opportunity to reap the benefits of these extensions by amending your return.
From the Trenches,