TEN FACTS ABOUT MORTGAGE DEBT FORGIVENESS

  1. Normally, debt forgiveness results in taxable income; however, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2M of debt forgiven on your principle residence
  2. The limit is $1M for a married person filing separately from their spouse
  3. You may exclude debt reduction through mortgage restructuring as well as mortgage debt forgiven in foreclosure
  4. To qualify, the debt must have been used to buy, build, or substantially improve your principle residence
  5. Refinance debt proceeds used for the purpose of substantially improving your principle residence also qualifies for the exclusion
  6. Proceeds of refinanced debt used for other purposes (ie. to pay off credit cards) does not qualify for the exclusion
  7. If you qualify, claim the special exclusion by filing Form 982
  8. Debt forgiven on second homes, rental property, business property, credit cards, or auto loans do not qualify for relief
  9. If your debt is reduced or eliminated you will receive a Form 1099C
  10. Examine the 1099C carefully and notify the sender of any errors immediately
Posted by Philip Fleishman at Thursday, March 04. 2010
Categories: uncategorized
Tags: discount tax prep tax prep discount bookkeeping mortgage debt forgiveness charleston tax prep discount charles tax prep tax preparation bookkeeping
 

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