Mortgage Debt Tax Relief Bill Signed into Law

President Bush on December 20 signed a bill (H.R. 3648) to exclude from gross income up to $2 million in "acquisition" debt forgiven on a mortgage directly related to a decline in the value of the the residence or to the financial condition of the taxpayer. Therefore, it appears that additional amounts borrowed based on the residence equity would not qualify.

Under H.R. 3648, the Mortgage Forgiveness Debt Relief Act of 2007, the tax exemption for mortgages is limited to a taxpayer's primary residence and to debt forgiven during tax years 2007, 2008, and 2009.

The measure also extends for three years, through 2010, the treatment of private mortgage insurance as deductible qualified residence interest for some taxpayers, and it treats as nontaxable income 50 percent of state and local tax rebates or reductions given to volunteer emergency responders.

Additionally, the Bill adds, effective January 1, 2008, in the case of a sale of his/her primary residence by an unmarried individual whose spouse is deceased on the date of such sale, the surviving spouse gets to exclude $500,000 in capital gain if such sale occurs not later than 2 years after the date of death of such spouse.

Click here for a copy of the bill.

AMT patch goes to President

H.R. 3996 the "Tax Increase Prevention Act of 2007," which extends the AMT patch, has passed the Senate and House, and is expected to be signed by the President.

The bill provides a one-year extension to the alternative minimum tax (AMT) exemption. The AMT exemption amounts, which are increased for inflation, are $66,250 for joint filers and $44,350 for individuals. The bill also extends the use of personal nonrefundable credits for AMT and regular tax purposes through December 31, 2007. These two changes will save an estimated 23 million taxpayers from paying AMT for the 2007 tax year.

Click here for a copy of the bill.

When AMT was enacted by Congress, the exemption for married couples was $30,000 and not indexed for inflation, that amount would be about $165,000 today if it had been indexed for inflation.

Web Sites to check for Product Recalls

A recent article from Market Watch cites three web sites for checking product recalls:
Government web site:
http://www.recalls.gov/recent.html,
Consumer Product Safety Commission Recall Announcements and Product Safetey Alerts page:
http://www.cpsc.gov/cpscpub/prerel/prerel.html, and
Consumer Reports (subscriptions required):
http://www.consumerreports.org/cro/consumer-protection/recalls/index.htm?AFFID=S01AR0.

Interest Rates Drop for the First Quarter of 2008

http://www.irs.gov/newsroom/article/0,,id=176038,00.html.

R-2007-193, Nov. 28, 2007

WASHINGON – The Internal Revenue Service today announced that interest rates for the calendar quarter beginning January 1, 2008, will drop by one percentage point. The new rates will be:

* seven (7) percent for overpayments [six (6) percent in the case of a corporation];
* seven (7) percent for underpayments;
* nine (9) percent for large corporate underpayments; and
* four and one-half (4.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during October 2007.

Related Item: Revenue Ruling 2007-68.