Removing the Mortgage Forgivess Tax and Extending Time on MI Tax Deduction

Here is an important update on the Mortgage Forgiveness Debt Relief Act of 2007 (H.R.‚3648) from the Daily Herald:

the House Ways and Means Committee voted to permanently remove the so-called “phantom income” tax penalty that haunts financially distressed homeowners whose debt is partially forgiven by a lender after a foreclosure or a “short sale” to avoid foreclosure.

Also, they also passed a provision to extend the deductibility of mortgage insurance premiums through 2014. This is also very important. Currently the deduction applies only to loans originated in 2007. So, if this becomes law we can pretty much kiss the need for a second mortgage good bye. We can go back to doing one loan (much simpler).

Both of these provisions still need to make it through the full House and Senate. However, I would think it will pass and become law before the end of the year.

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