With the introduction of the SECURE Act, the exclusion from gross income for a discharge of qualified principal residence debt has been extended. This is good news for taxpayers who had part or all of their mortgage forgiven by a bank or a financial institution.
Qualified principal indebtedness includes any debt from acquiring, constructing, or improving a principal residence that is secured by the principal residence. A taxpayer can only have one principal residence at a time. This is generally the home where you live for the majority of the time.
With the introduction of the new SECURE Act, the exclusion from taxable income for the discharge of principal residence indebtedness has now been extended to debts discharged before January 1, 2021 or subject to an arrangement that is entered into and stated in writing before January 1, 2021. This provision previously only applied to debts or arrangements entered into before January 1, 2018.