Mortgage Forgiveness Debt Relief Act of 2007

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The Mortgage Forgiveness Debt Relief Act of 2007 is a U.S. law that helps homeowners avoid paying taxes on forgiven mortgage debt after foreclosure. It mainly covers debt forgiven on your primary home and was signed into law in December 2007.

Dates and extensions:
- It originally applied to debts discharged in 2007–2009.
- Extended through 2012 by the Emergency Economic Stabilization Act of 2008, then through 2014 by the American Taxpayer Relief Act of 2012.
- The relief has been renewed each year since.
- The Bipartisan Budget Act of 2018 renewed it for the 2017 tax year and added other tax benefits.

How it works:
- The IRS normally treats forgiven debt as income. This act can exclude forgiven mortgage debt from your income, up to a limit.
- The exclusion amount is up to $2 million per year.
- If your debt is forgiven, your lender will send you Form 1099-C, Cancellation of Debt.
- If you qualify for the exclusion, you will need to file Form 982 with your tax return.

Eligibility and limits:
- The relief applies only to debt on a primary residence. Debts on vacation homes or rental properties do not qualify.
- If you used cash-out refinancing for reasons other than fixing up your home, you could still owe tax on the forgiven debt (though some amendments have been made).
- Rules can change, so it’s important to check current laws and talk to a tax advisor to see if you qualify.
- The exclusion is not guaranteed forever; if the law expires, forgiven mortgage debt could be taxable again.

Summary:
This act provides a tax break for forgiven mortgage debt on your main home, with certain yearly limits and rules. It has been extended repeatedly and renewed, but eligibility depends on your situation and current law.