Bill > S1368

This bill amends existing law to exclude certain forgiven debts related to a principal residence from being considered taxable income, meaning individuals won't have to pay taxes on that forgiven amount. Specifically, it defines "qualified principal residence indebtedness" as debt used to buy a primary home, with limits of $2 million for those married filing jointly and $1 million for those filing separately. This exclusion applies to debt discharged due to a decline in the home's value or the taxpayer's financial situation, but not for reasons like services performed for the lender. If only part of a loan qualifies, the exclusion applies only to the qualified portion, and this principal residence exclusion takes priority over an insolvency exclusion unless the taxpayer chooses otherwise. The bill also clarifies that the definition of "principal residence" is the same as used in federal tax law. These provisions are retroactive, applying to debt discharges on or after January 1, 2013.