House Approves Mortgage Forgiveness Tax Legislation

On October 4, 2007, the House passed the Mortgage Forgiveness Debt Relief Bill of 2007 (HR 3648) by a vote of 386 to 27. The legislation would permanently exclude forgiven or renegotiated mortgage debt related to a principal residence from taxation. The legislation would also extend the deduction for mortgage insurance premiums. The legislation would be paid for by restricting the home sale exclusion in situations where there had been a nonqualified use of the residence prior to its qualified use. The legislation also makes a further tweak in the time for payment of corporate estimated taxes.

It is not clear when the Senate will take up the legislation. President Bush has expressed reservations about the permanent nature of the debt forgiveness legislation and the revenue raising provisions but has not threatened a veto.