What IRS Wants You To Know About Mortgage Debt Foregiveness

What IRS Wants You To Know About Mortgage Debt Forgiveness

 

Normally Debt Forgiveness will result in taxable income but under the Mortgage Debt Relief Act of 2007 you may be able to exclude some of the principle of your primary residence. The limit for a married person filing separately is $1 million

You may also exclude debt reduced through mortgage restructuring and mortgage debt forgiven in a foreclosure.

There is some criteria that has to met to qualify.

The debt has to have been used to buy, build, or substantially improve your primary residence and had to have been secured by that same residence. This also includes refinanced debt.

It does not include debt that was borrowed to pay off credit cards or some other like purpose.

Use IRS Form 982, Reduction Of Tax Attributes Due To Discharge of Indebtedness to claim the exclusion and file it with your regular federal tax income tax return in the year that the debt was forgiven.

You can not claim debt on a second home, rental property, business property, credit cards, or car loans. There may other tax relief provisions such as insolvency that may be applicable on this same IRS Form 982.

Normally if your debt was reduced or eliminated you will receive a year end statement it would be the 1009 -C Cancellation Of Debt from your lender. By law this form must show the amount of debt forgiven and the fair market value of the property foreclosed on. Be sure and examine the 1099-C carefully and notify the immediately if the information provided is not correct. You should pay careful attention to the amount of the debt forgiven as well as the fair market value shown. More information is available at www.irs.gov  or by calling 800-829-3676

 

 

Information provided here as a courtesy to my readers you should double check the information with the proper authorities for accuracy.

Sally Morris at Greenwood Realty in Greenwood SC offers buyers and sellers expert and friendly down to earth real estate solutions. Search all the listings at  www.RealEstateGreenwoodSC.com and contact Sally Morris O 864-538-0044 C 864-344-1728 for all your real estate needs. I specialize in selling real estate, all kinds, all price ranges, any area, if it's real estate I can help you buy it or sell it.