Senator John Kerry and Massachusetts State Treasurer Timothy Cahill today applauded Congress for passing much needed mortgage tax relief to thousands of Massachusetts families caught in the sub-prime mortgage crisis. This legislation was based on S. 1394, the Mortgage Cancellation Relief Act of 2007 introduced earlier in the year by Senators Stabenow and Kerry.
"Massachusetts is on pace to have a record number of foreclosures this year and more than two million American families today are at risk of losing their homes. Even worse, next year tens of thousands of adjustable-rate mortgages in our state will be reset to higher interest rates. Homeowners that have mortgage debt forgiven should not be hit with a tax bill. This legislation will give much needed relief to those who are caught on the receiving end of the sub-prime mortgage crisis," said Senator Kerry.
"This legislation will provide opportunities for Massachusetts residents to remain homeowners," said Treasurer Cahill. "In light of the current mortgage foreclosure crisis, I am grateful to Senators Kerry and Stabenow, as well as other leaders in Washington, for their advocacy on this issue."
Before the Congress passed these reforms, when debt was forgiven on a home loan, the homeowner was forced to treat that debt forgiveness as income and pay taxes on it. The Stabenow-Kerry legislation creates a three year exception to this rule - allowing families already unable to meet their mortgage payments to avoid paying even higher tax bills.
The bill extends a current provision which allows homeowners to deduct mortgage insurance payments from their taxable incomes. It also includes tax relief for volunteer firefighters and emergency medical technicians, help to expand housing options for college students with children, flexibility to help co-op tenants/owners deduct real estate taxes and mortgage insurance, and protection of tax relief for homeowners after the death of a spouse.
The bill now goes to the White House for the President to sign.