The Mortgage Debt Tax Forgiveness Act of 2025: Explained

Overview: Mortgage Debt Tax Forgiveness Act of 2025

The Mortgage Debt Tax Forgiveness Act of 2025 would make permanent a tax exclusion for forgiven mortgage debt on a main home. When the exclusion applies, the forgiven amount is not treated as taxable income.

This proposal matters to homeowners because mortgage debt can sometimes be forgiven through a loan change, a short sale, or other outcomes where the lender agrees to accept less than the full balance. The bill focuses on keeping that forgiven amount from increasing your federal taxable income when it qualifies.

The bill’s effective date applies to mortgage debt forgiven after Dec. 31, 2025. Note that bills often change on their way to becoming law, so this page will update as new details emerge. For real-time updates, subscribe to our newsletter.

What Is the Mortgage Debt Tax Forgiveness Act of 2025?

The Mortgage Debt Tax Forgiveness Act of 2025 is a federal tax bill focused on how forgiven mortgage debt is treated on your federal income tax return.

Today, forgiven debt can sometimes be treated as income for tax purposes. This bill aims to make sure that, when the forgiven debt is tied to your main home and meets the bill’s definition, it can be excluded from taxable income.

Who Qualifies Under the Mortgage Debt Tax Forgiveness Act of 2025?

The bill applies to forgiven mortgage debt that is considered qualified principal residence mortgage debt. In plain terms, that points to:

• The home is your main home
• The mortgage debt is tied to that main home
• The debt is forgiven, and the forgiveness happens after Dec. 31, 2025

The details of what counts as “qualified” are handled through the tax rules the bill makes permanent, but the headline is straightforward: it’s designed for mortgage debt forgiven on a primary residence.

How The Mortgage Debt Tax Forgiveness Act of 2025 Works

The bill’s core change is to make permanent a tax exclusion for forgiven mortgage debt on a main home. Here’s the practical effect:

• When eligible mortgage debt is forgiven, the forgiven amount can be excluded from taxable income
• The exclusion applies to qualified principal residence mortgage debt
• The effective date is mortgage debt forgiven after Dec. 31, 2025

For homeowners, the day-to-day takeaway is that mortgage debt forgiveness that qualifies under the bill is treated more like a tax exclusion than extra income.

When The Mortgage Debt Tax Forgiveness Act of 2025 Would Take Effect

The Mortgage Debt Tax Forgiveness Act of 2025 is effective for mortgage debt forgiven after Dec. 31, 2025. That timing matters when forgiveness happens close to the end of a calendar year because taxes are calculated by tax year.

If the bill becomes law, the tax treatment described on this page would apply based on when the mortgage debt is forgiven.

Who Sponsors the Mortgage Debt Tax Forgiveness Act of 2025?

H.R. 917 was introduced in the House. The sponsor and any cosponsors can change as the bill moves through Congress, and support often grows when related tax provisions are debated.

For the latest legislative updates and cosponsors, see the Bill Tracker above.