Bill > S1959

This bill proposes a tax relief provision for homeowners experiencing mortgage debt discharge by amending Massachusetts tax law. Specifically, the bill allows individuals to exclude from their gross income debt forgiveness related to their principal residence, including debt reduced through mortgage restructuring or forgiven during foreclosure, with several important conditions. The exclusion is limited to $2,000,000 of forgiven debt (or $1,000,000 for married individuals filing separately), and only applies to "acquisition indebtedness" as defined by federal tax code. The amount excluded from income must reduce the tax basis of the principal residence, but not below zero. The debt discharge cannot be related to services performed for the lender, and must be directly connected to a decline in the residence's value or the homeowner's financial condition. If only part of a loan qualifies for the exclusion, only the qualifying portion can be excluded. The bill specifies that the principal residence exclusion takes precedence over an insolvency exclusion unless the taxpayer elects otherwise, and defines "principal residence" according to federal tax code. The provision applies retroactively to debt discharges on or after January 1, 2013, and requires the tax commissioner to create regulations implementing these rules.

Budget and Finance

https://malegislature.gov/Bills/194/S1959