Summary

Removes the temporary date limits that previously restricted when forgiven mortgage debt on a primary home could be excluded from taxable income, making that exclusion available permanently for discharges that occur after December 31, 2025. Homeowners who have mortgage debt forgiven (for example after a foreclosure, short sale, deed in lieu, or lender settlement) would generally not have to count that forgiven principal residence debt as taxable income for discharges after that date.

• Removes date-based limits on the exclusion for forgiven principal residence mortgage debt.
• Amendment changes 26 U.S.C. §108(a)(1)(E) to make the exclusion available beyond previously listed dates.
• Effective for discharges of indebtedness occurring after December 31, 2025.
• Homeowners with qualifying forgiven mortgage principal will not have to count that forgiven amount as taxable income for covered discharges.
• Likely reduces federal income tax receipts modestly depending on future mortgage debt forgiveness activity.
• Applies only to qualified principal residence indebtedness; other tax rules still apply.
• May require IRS guidance and changes in reporting practice (e.g., treatment of canceled debt forms).
• Does not appropriate funds or authorize new programs; it is a change to the tax code.