In my last article I discussed some last-minute tax law changes that were expected. They indeed came through in December, and they are not earth-shattering. Teachers can deduct $250 in expenses, and college tuition gets a $4,000 deduction or a tax credit, whichever you prefer. And mortgage insurance premiums are now deductible.
Another mortgage-related change is a big deal. It is called “exclusion from income for discharge of mortgage debt,” and here is what it means: Say you are underwater in your mortgage, owing the bank more than what your residence is worth. The mortgage company might “write off ” some of the debt, and you now officially owe less principal. Normally, if someone forgives debt that you owe him, you have to claim the forgiven amount as income. This included home mortgages that were renegotiated, which could become a disaster. This new provision saves people who are in that situation.