Mortgage Debt Tax Forgiveness Act of 2025

This bill permanently excludes forgiven mortgage debt on primary residences from taxable income under the Internal Revenue Code. It directly affects homeowners who have their mortgage debt forgiven (e.g., through short sales or foreclosure) by preventing them from owing income tax on the forgiven amount. The key change amends tax code Section 108(a)(1)(E) to remove the temporary expiration date, making the exclusion permanent. The provision applies to mortgage debt discharged after December 31, 2025. This simplifies tax treatment for affected homeowners without creating new government programs or benefits.