The Mortgage Forgiveness Debt Relief Act of 2007 allows for the exclusion of discharged qualified principal residence indebtedness canceled in 2007 through 2012. This Act allows homeowners to exclude the debt forgiven from your taxable income, if you are underwater on your mortgage and have a foreclosure.
Congress needs to start working on the extension NOW. There are still 3 million people who are underwater on their mortgages. If the act is not extended and these people have to file for foreclosure, they will also be subject to a tremendous tax bill..