Bill Summary
The "Mortgage Debt Tax Forgiveness Act of 2025" is a piece of legislation aimed at amending the Internal Revenue Code to permanently exclude the discharge of qualified principal residence indebtedness from gross income for tax purposes. This means that homeowners who have their mortgage debt forgiven or discharged will not have to count that forgiven debt as taxable income. The bill modifies Section 108(a)(1)(E) of the Internal Revenue Code by removing the temporary nature of this exclusion, thus making it a permanent provision. The changes will take effect for any debts discharged after December 31, 2025, providing ongoing tax relief to homeowners facing mortgage debt forgiveness.
Possible Impacts
The "Mortgage Debt Tax Forgiveness Act of 2025" as described in the provided legislation could affect people in several ways:
1. **Financial Relief for Homeowners**: Homeowners who have experienced a foreclosure or have had their mortgage debt forgiven will not have to count that forgiven debt as taxable income. This can provide significant financial relief, preventing them from facing an unexpected tax burden that could complicate their financial recovery.
2. **Encouragement for Home Sales and Modifications**: Knowing that the discharge of mortgage debt will not be taxed may encourage homeowners to sell their homes or modify their loans instead of facing foreclosure. This could lead to a more fluid housing market, as homeowners may feel more secure in making decisions to offload properties they can no longer afford.
3. **Impacts on Tax Planning**: Individuals and tax professionals will need to adjust their tax planning strategies. Homeowners might be more inclined to engage in debt forgiveness programs or short sales, knowing that such actions won’t have a tax penalty. This could lead to a shift in how financial advice is given and how homeowners approach their mortgage obligations and overall debt management.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 917 Introduced in House (IH)]
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119th CONGRESS
1st Session
H. R. 917
To amend the Internal Revenue Code of 1986 to make permanent the
exclusion from gross income of discharge of qualified principal
residence indebtedness.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 4, 2025
Ms. Brownley introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to make permanent the
exclusion from gross income of discharge of qualified principal
residence indebtedness.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Mortgage Debt Tax Forgiveness Act of
2025''.
SEC. 2. PERMANENT EXTENSION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE
OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.
(a) In General.--Section 108(a)(1)(E) of the Internal Revenue Code
of 1986 is amended by striking ``which is discharged'' and all that
follows and inserting a period.
(b) Effective Date.--The amendment made by this section shall apply
to indebtedness discharged after December 31, 2025.
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