The Mortgage Forgiveness Debt Relief Act of 2007, which was scheduled to expire on December 31st, received a one year extension. The act was designed to allow “homeowners who experienced a debt reduction through mortgage principal forgiveness or a short sale” an exemption from “being taxed on the forgiven amount.” The act is now set to expire January 1, 2014.
A law allowing homeowners to deduct mortgage insurance premiums, which had expired at the end of 2011, has been reenacted. Per Compass Point Research & Trading’s Isaac Boltansky, the American Taxpayer Relief Act of 2012 will apply for the 2012 and 2013 fiscal years and will allow “borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year” to “deduct 100% of their annual mortgage insurance premiums.”
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For more information on the IRS website, go to: http://www.irs.gov/publications/p530/ar01.html