Homeowner Assistance for 2007

Increasing the amount for AMT exemptions was one of many changes in tax law during 2007. The federal legislature also made possible tax deductions for persons facing home foreclosures, as well as those purchasing mortgage insurance policies last year.

Mortgage insurance is mandatory in cases where buyers put down less than one-fifth of the purchase price of a home and are using government-subsidized or private banking loans. The premium for this policy is deductible for up to two homes, but only if the insurance contract was signed in 2007.

Income limitations also apply. Tax deductions decrease after adjusted gross income (AGI) becomes greater than $100,000 if people are filing jointly or singly. If the return is for a married couple filing separately, the benefit decreases after $50,000. The deduction ends at adjusted gross incomes greater than $109,000 for the former category, and $54,500 for the latter.

One ray of hope is available for those facing foreclosure. Congress passed a provision near the end of the last year when the mortgage crisis became widely apparent. Those persons who were forgiven mortgage debts in 2007 are not taxed on the amount forgiven, if that amount is less than $2 million. Married persons who are filing separately are not taxed on amounts up to $1 million. Before this law, forgiven loans could be ruled taxable income.

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