IRS Provides Relief for Financially Distressed Homeowners by Angie Adames, CPA

Posted on September 29, 2017 by Angie Adames

The IRS recently extended until the end of 2021, a safe-harbor method for financially distressed homeowners to compute deductions for payments made on a home mortgage under state- and federal-sponsored Housing Finance Agency (HFA) foreclosure-prevention program. The relief was set to expire in 2017.


Eligible homeowners include 1) individuals who meet the requirements under Internal Revenue Code Sections 163 and 164 to deduct all of the mortgage interest and real estate taxes on a principal residence and 2) those individuals who participate and receive payments from HFA programs to pay interest on their home mortgages. For taxable years 2010 through 2021, eligible homeowners may deduct from their Federal income tax returns, the lesser of:

1.     The sum of all home mortgage payments the homeowner actually makes during a taxable year to the mortgage servicer or the State HFA, or

2.     The total amount of a taxpayers’ mortgage interest received, real property taxes, and deductible mortgage insurance premiums shown on Form 1098, Mortgage Interest Statement.


Under Notice 2017-40, the IRS also extends through 2021 relief for mortgage servicers and state housing finance agencies from penalties relating to information reporting.

About the Author: Angie Adames, CPA, is an associate director with Berkowitz Pollack Brant’s Tax Services practice, where she provides tax and consulting services to real estate companies, manufacturers and closely held business. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or via email at