Mortgage Tax Relief

October 4 2007 CNBC.com House lawmakers are due to vote Thursday on a bill that would allow homeowners to avoid paying taxes on mortgage debt which gets forgiven as part of a foreclosure or a modified loan. The bill by Rep. Charles Rangel, D-N.Y., is expected to receive bipartisan support as a way to assist borrowers caught up in a surge of foreclosures nationwide. Currently, if a lender forgives a portion of a mortgage, taxpayers are still required to report that amount as income and pay taxes on it. Rangel has said that families coping with a foreclosure "should not have the double whammy of a large tax bill for terminating their mortgage". President Bush in August called on lawmakers to pass similar legislation. While the White House supports the bill, it says the change should be temporary, not permanent as the House bill mandates. The cost of the bill, estimated at $2 billion over 10 years, is offset by tightening restrictions on tax breaks for the sale of second homes.

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