H.R.917 - Mortgage Debt Tax Forgiveness Act of 2025 (119th Congress)
Summary
H.R. 917, the Mortgage Debt Tax Forgiveness Act of 2025, seeks to make permanent the exclusion from gross income the discharge of qualified principal residence indebtedness. This bill amends Section 108(a)(1)(E) of the Internal Revenue Code of 1986. The amendment applies to indebtedness discharged after December 31, 2025.
Currently, this exclusion is not permanent and requires periodic renewal by Congress. Making it permanent would provide long-term certainty to homeowners facing financial hardship.
The bill was introduced in the House of Representatives by Ms. Brownley and referred to the Committee on Ways and Means.
Expected Effects
If enacted, H.R. 917 would permanently prevent homeowners from having to pay income taxes on the amount of mortgage debt forgiven by lenders. This primarily affects individuals who have experienced foreclosure, short sales, or loan modifications that resulted in debt forgiveness.
By removing the uncertainty of periodic extensions, homeowners can make better informed financial decisions. It also simplifies tax planning for individuals and lenders involved in mortgage debt relief.
Potential Benefits
- Provides long-term financial certainty for homeowners facing mortgage debt forgiveness.
- Simplifies tax planning for individuals and lenders.
- Potentially prevents some foreclosures by making loan modifications more attractive.
- Could stabilize housing markets by reducing the tax burden associated with distressed properties.
- May encourage lenders to work with struggling homeowners, knowing the forgiven debt won't create a tax liability for the borrower.
Most Benefited Areas:
Potential Disadvantages
- May increase the national debt by reducing tax revenue.
- Could be perceived as unfair to taxpayers who do not receive mortgage debt forgiveness.
- May incentivize excessive borrowing, as the consequences of debt forgiveness are lessened.
- Could create a moral hazard, where individuals take on more risk knowing there is a potential tax benefit if things go wrong.
- The cost of the program is not explicitly addressed, potentially leading to unforeseen budgetary impacts.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the general welfare clause of the Constitution (Preamble), as it aims to promote the financial stability of homeowners. Article I, Section 8 grants Congress the power to lay and collect taxes, duties, imposts, and excises, implying the authority to define what constitutes taxable income and to create exemptions.
The bill does not appear to infringe upon any specific constitutional rights or limitations. The power to legislate tax policy is explicitly granted to Congress.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).