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As tax season begins the IRS is offering two important tax tips for Michigan homeowners.
First, money paid during 2007 for qualified mortgage insurance can count as home mortgage interest. Private mortgage insurance paid in 2007 -- required when financing more than80 percent of a home's value -- may be deducted. “The policy must have been issued in 2007, and phases out once your adjusted gross income reaches $100,000 (or $50,000 for married people filing separately)” said IRS Spokesperson Luis D. Garcia. The insurance must be in connection with home acquisition debt, the insurance contract must have been issued after 2006, and taxpayers must have paid the premiums before 2008 for coverage in effect during 2007. For the definitions of home acquisition debt and qualified home, see Publication 936, Home Mortgage Interest Deduction.
Secondly, beginning in tax year 2007 and valid through 2009, taxpayers can exclude up to $2 million of debt forgiven on their principal residence. The limit is $1 million for a married person filing a separate return. The provision applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure qualifies for this relief.
“Now taxpayers that sell their property for less than the amount owed, or a "short sale, or foreclosure" then have the amount of the debt forgiven by the lender will not be taxed on that forgiven amount as they had been in years prior, said Garcia.
For more information, visit www.IRS.gov, or pick up Publication 544, Sales and Other Dispositions of Asset, or contact us at 1 800-829-1040. |
