More Tax Relief for Homeowners: PMI and Insolvency
Tax relief continues for homeowners in various forms for this 2007 tax season. Mortgage debt forgiveness is no longer considered income, and there have been some other points that should be made concerning tax relief. Look below and see if you can benefit from your private mortgage insurance premiums — or even from financial insolvency.
Private mortgage insurance
If you buy a home with less than 20 percent down, most mortgage lenders require you to get private mortgage insurance (PMI). A couple of years ago, new tax rules made it so that PMI premiums could be deducted like mortgage interest paid. However, these provisions were set to expire this year. Instead, the provision has been extended.
Insolvency can help you gain tax relief on a short sale
For homes facing foreclosure and homeowners hoping to avoid it with a short sale, the mortgage debt forgiveness tax rule doesn’t apply. Instead, homeowners in this position can prove that they are insolvent in order to avoid paying income tax. Inman News explains how to figure insolvency:
To figure out whether you’re insolvent (for IRS purposes) Burgess suggests using form 433F, which is the “Collection Information Statement.” (Download IRS forms for free at www.IRS.gov.) One side of the form lists all of the assets and debts. The other side lists monthly income and expenses. You can fill out the form online and then print it, or print first and work on it by hand. …
Add up all of your assets and then all of your debts. If your debts exceed your assets, you are insolvent by that amount. In other words, you’ve calculated your net worth, and come up with a negative number.
Before you file your taxes, realize that there are a number of new tax relief measures for the 2007 tax season. Either visit the IRS Web site for information or consult a tax attorney or accountant.
Tags: homeowners, private mortgage insurance, home mortgage loan, mortgage loan blog,
mortgage lenders, tax relief, 2007 tax season
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