Relief in mortgage forgiveness, PMI deduction

Restrictions apply if loan was refinanced, income too high

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Homeowners who went through foreclosure in 2007 could receive a benefit on their federal income tax return thanks to the Mortgage Forgiveness Debt Relief Act of 2007. Under the new law, taxpayers no longer have to pay tax on the value of their home loan if the loan was cancelled through a foreclosure proceeding, otherwise known as "cancellation of indebtedness income."