PMI and Mortgage Debt Forgiveness Tax Relief Extended Thru 2017
Friday, February 16, 2018 9:00 AM

Last week, the Congress passed a short term "continuing resolution" to fund the government through March 23, 2018.  Included in the bill was the Bipartisan Budget Act of 2018, laying the groundwork for a larger budget deal to fund the government for the remainder of fiscal year 2018.  As part of this new law, the National Flood Insurance Program (NFIP) is reauthorized on the same track as government spending until March 23.  

In addition, the new law includes two tax extender provisions of importance to credit unions.  The discharge of mortgage debt forgiveness not treated as income is extended through the end of 2017 so people with forgiven mortgage debt won't have to pay federal taxes on the forgiven debt from 2017. This provision eliminates the requirement for most financial institutions (including credit unions) to file an IRS Form 1099-C ("Discharge of Indebtedness") on a mortgage default involving an individual's primary residence.  Should the provision not have been extended, credit unions would have been required to file IRS Form 1099-Cs on certain serviced mortgages, adding to the already high compliance burden on credit unions. 

The second tax provision in the law deals with mortgage insurance premiums.  Insurance premiums paid in 2017 will be deductible as homeowners file their 2017 tax returns. 

So, what is this going to mean for all of those 1098s that have already been filed in compliance with the pre-February 9th law that did not allow for PMI tax relief?  Standard procedure would be to issue amended 1098s. CUNA hopes the IRS will offer some guidance quickly.

As of this newsletter, the IRS website says:

The IRS is reviewing the legislation signed Feb. 9 that retroactively extended and modified numerous tax provisions covering 2017. We are assessing these significant changes in the tax law and beginning to determine next steps. The IRS will provide additional information as quickly as possible for affected taxpayers and the tax community.

Source:  CUNA Compliance Blog