What is the Mortgage Forgiveness Debt Relief Act of 2007?
It was enacted on December 20, 2007 and allows homeowners to exclude income realized as a result of modification of the terms of your mortgage, or foreclosure of your principle residence.
What changed?
In the past debt that was forgiven or cancelled by your lender would have been included as income on your tax return, and would have been taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principle residence from income.
What about refinanced homes?
Debt used to refinance your home qualifies for this exclusion, buy only up to the extent that the principle balance of your old mortgage, immediately before refinancing, would have qualified.
Does this apply only for the 2007 tax year?
No. It applies to qualified debt forgiven in 2007, 2008, and 2009.
If the debt is forgiven from income, do I still have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and the form 982 must be attached to your tax return.
Can I exclude debt forgiven on my second home?
Not under this provision. Only cancelled debt used to buy, build or improve your principle residence or refinance debt incurred for those purposes qualifies for this exclusion.
How do I know or find out how much was forgiven?
Your lender should send you a Form 1009-C, Cancellation of debt, by January 31 of the year following your debt relief.
Is there anything else I should know?
Yes. Because The Mortgage Forgiveness Debt Relief Act of 2007 was passed so late in the year, the software systems used by tax preparers and the IRS needed to be updated to accept the revised Form 982. This occurred in the first week of March, 2008. If you filed earlier than that and are qualified to receive the debt forgiveness, you should speak with a tax professional as soon as possible about your options. For more information on this topic, log onto www.IRS.gov.
Happy Investing!
Information provided herein is deemed reliable but is not guaranteed. Please consult with an attorney or tax consultant before making any decisions.
It was enacted on December 20, 2007 and allows homeowners to exclude income realized as a result of modification of the terms of your mortgage, or foreclosure of your principle residence.
What changed?
In the past debt that was forgiven or cancelled by your lender would have been included as income on your tax return, and would have been taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principle residence from income.
What about refinanced homes?
Debt used to refinance your home qualifies for this exclusion, buy only up to the extent that the principle balance of your old mortgage, immediately before refinancing, would have qualified.
Does this apply only for the 2007 tax year?
No. It applies to qualified debt forgiven in 2007, 2008, and 2009.
If the debt is forgiven from income, do I still have to report it on my tax return?
Yes. The amount of debt forgiven must be reported on Form 982 and the form 982 must be attached to your tax return.
Can I exclude debt forgiven on my second home?
Not under this provision. Only cancelled debt used to buy, build or improve your principle residence or refinance debt incurred for those purposes qualifies for this exclusion.
How do I know or find out how much was forgiven?
Your lender should send you a Form 1009-C, Cancellation of debt, by January 31 of the year following your debt relief.
Is there anything else I should know?
Yes. Because The Mortgage Forgiveness Debt Relief Act of 2007 was passed so late in the year, the software systems used by tax preparers and the IRS needed to be updated to accept the revised Form 982. This occurred in the first week of March, 2008. If you filed earlier than that and are qualified to receive the debt forgiveness, you should speak with a tax professional as soon as possible about your options. For more information on this topic, log onto www.IRS.gov.
Happy Investing!
Information provided herein is deemed reliable but is not guaranteed. Please consult with an attorney or tax consultant before making any decisions.
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