Friday, July 15, 2011
Joint Committee On Taxation Releases Paper On Tax Treatment Of Household Debt
The Joint Committee on Taxation (JCT) on July 11 published a document covering present law and background regarding the tax treatment of household debt. (JCX-40-11) The document includes economic data on the subject, a detailed description of the major present-law federal income tax rules governing household debt, a discussion of the economic incentives created by these rules, and a comparison of the tax treatment of common types of household debt in seven other countries–Australia, Canada, France, Germany, Japan, Mexico, and the United Kingdom. The discussion of present law covers the deductibility of interest expense of households (disallowance of deduction for personal interest, deduction for home mortgage interest allowed, deduction for student loan interest, deductible investment interest expense limited to net investment income for individuals, debt with respect to certain insurance products,00 and disallowance of deduction for interest incurred to purchase tax-exempt obligations) and the discharge of indebtedness income (tax treatment of income from discharge of indebtedness and exclusion of income from certain student loan forgiveness). JCX-40-11 can be found at http://www.jct.gov/publications.html.