As I disclosed last month, I’m pleased to introduce a new column in the monthly newsletter. “Spotlight On...” will focus on our neighbors and small businesses, but per request, it will first look at tax changes affecting homeowners for its articles in February, March and April.
In May, we’ll start spotlighting a member of the community for this regular column. These are people and businesses making a difference at school, home or in the community.
Mortgage Forgiveness Debt Relief Act of 2007
This law was signed in December. Here’s a summary:
The main attribute of this law is not being taxed on losses in selling your principal residence between January 1, 2007, and December 31, 2009. If you owe more than the home sells for, typically, the bank gives you a 1099 telling you that the forgiven portion of the mortgage needs to be considered as income. If you buy, build, or improve a residence with the loan, you can exclude up to $2 million ($1 million if married filing separately) from being considered as income.
For example, assume that a taxpayer has a $500,000 loan outstanding on his principal residence, of which $80,000 is equity debt. If $100,000 of the loan amount is discharged, only $20,000 ($100,000 discharged debt — $80,000 equity debt) of the debt discharge qualifies for the exclusion under the new provision.
There are other parts of the law addressing gain on sale of a home for surviving spouses, certain income for Volunteer firefighters and EMTs, and partnerships not filing their taxes.
Source: H&R Block
Do you know someone worth Spotlighting? Please send Mr. Chang an email at changhomes@gmail.com. It can be someone with an innovative business idea or product, someone starting their own business, or someone making a difference in school, after-school, work or the community in the Santa Clarita, Antelope or San Fernando Valleys.
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