Mortgage Debt Forgiveness Act 2007

This act was originally introduced HR 3648 and was passed into law on December 20^th 2007 when it was signed by the president.  The Bill received an overwhelming amount of support in the House and was seen by many as a major step in the right direction. Prior to the passage of this law, for any debt that was forgiven in a short sale or a foreclosure the homeowner would receive a 1099 and would have to report this forgiven (or cancelled) debt as income.  This still holds true for those individuals who do not qualify for the exceptions of this act.  From January 1, 2007 to January 1^st, 2013 eliminates the phantom tax on debt cancellation in mortgage discharge. ·        Debt must have been debt incurred to acquire a principal residence. ·        Cancelled debt up to $2,000,000 is eligible.·        Sets forth rules for determining the allowable amount of the exclusion for taxpayers with non-qualifying indebtedness and taxpayers who are insolvent. ·        Debt from a second (non acquisition) mortgage or HELOC is not eligible. ·        Cancelled debt from investment properties and second homes is not eligible.  Extends through 2010 the tax deduction for mortgage insurance premiums, previously was only in place for 2207. 1 in 10 homeowners pays PMI this will save the average homeowner with PMI approximately $350 per year. Allows deduction of payments to a Co-op corporation if: ·        80% or more of the total square footage of the corporation’s property is used or available for use by its tenant-stockholders for residential purposes·        Or 90% of the corporation’s expenditures are for the acquisition, construction, management, maintenance, or care of tis property for the benefit of the tenant-stockholders. ·        For homeowners with income under $100,000 a year 100% is deductible for those making up to $109,000 a percentage is deductable. Over $109,000 there is a no deduction. Reduces the income tax breads on most gains from the sales of non-primary residences using a formula based on the amount of time that the taxpayer actually lived in the property during the five-year period before the sale.  Previously a homeowner only had to have lived in property for 2 years to have non-taxable income of $500,000 after 5 years. Allows a surviving spouse to exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse,  ·        If the sale or exchange occurs within two years of the death of the spouse (previously was only one year) and ·        The property was used as a primary residence for at least 2 of the previous 5 years. (At the time of publication it is still unclear if the previous provision in this law affects this exclusion). Allows members of a qualified volunteer emergency response organization (i.e., an organization that provides firefighting and emergency medical services) an exclusion from gross income for state and local tax benefits and for certain payments for services. Terminates such exclusion after 2010.   Allows for full-time students who are single parents and their children to live in housing units eligible for the low-income housing tax credit provided that their children are not dependents of another individual (other than a parent of such children). Increases the penalty for failure to file a partnership tax return and extends from five to 12 the number of months in which such penalty may be imposed.  Limits disclosure of tax return information that includes individual taxpayer identify information.   Imposes an additional penalty on S corporations for failure to file required tax returns.   Amends the Tax Increase Prevention and Reconciliation Act of 2005 to increase the estimated tax payment due in the third quarter of 2012 for corporations with assets of at least $1 billion.