Bill > H2607

This bill proposes to allow individuals to deduct from their taxable income any income they receive from the discharge of debt on their primary home, which includes situations where the debt is reduced through mortgage restructuring or forgiven due to foreclosure. This tax relief is subject to certain conditions: the forgiven debt cannot exceed $1,000,000 for individuals or $2,000,000 for married couples filing jointly, and it must be related to "acquisition indebtedness," which generally refers to debt used to buy, build, or substantially improve a home. The bill also clarifies that "principal residence" has the same meaning as in federal tax law, and the relief will not apply if the debt forgiveness is for reasons unrelated to a decline in the home's value or the homeowner's financial situation, such as for services rendered to the lender. This provision will be effective for debt discharges occurring on or after January 1, 2013, and the state's Department of Revenue will be responsible for creating regulations to implement it.