Inside the 654 page bill recently signed into law are little noticed extensions of tax code benefits that expired in 2016 and can be used in upcoming 2017 filings – IF YOU ARE AWARE OF THEM!
1) Congress first authorized tax deductions for mortgage insurance premiums more than a decade ago, but legal authority for the write-offs lapsed at the end of 2016. The new budget bill provides for a retroactive extension for premiums paid during 2017, but it is silent about future deductions, including 2018.
To qualify for the benefit –
a) must be principal residence
b) adjusted gross income must total less than 100k
2) Another retroactive provision brought back for 2017 filings is the elimination of tax liability on mortgage debt forgiven by lenders in connection with short sales, foreclosures and loan modifications.
a) Without this – financially distressed homeowners are subject to the tax code’s traditional harsh treatment of cancelled debt – forgiven amounts taxed as ordinary income at regular rates.
b) Debt forgiveness expired in 2016, but under the new budget bill, homeowners who had mortgage debt canceled by their lender in 2017 may be eligible for tax relief. This is spelled out in Publication 4681.