logo
g Text Version
Beauty & Self
Books & Music
Career
Computers
Education
Family
Food & Wine
Health & Fitness
Hobbies & Crafts
Home & Garden
Money
News & Politics
Relationships
Religion & Spirituality
Sports
Travel & Culture
TV & Movies

dailyclick
Bored? Games!
Nutrition
Postcards
Take a Quiz
Rate My Photo

new
Action Movies
Bible Basics
Houseplants
Romance Movies
Creativity
Family Travel
Southwest USA


dailyclick
All times in EST

Clairvoyance: 08:00 PM

Full Schedule
g
g Taxes Site

BellaOnline's Taxes Editor

g

Foreclosures and Mortgage Workouts and Taxes

Guest Author - Kate Woods

It is a sad but true fact that many people are experiencing severe hardship now and some are unable to keep their homes. There is a new tax provision under the Mortgage Forgiveness Debt Relief Act of 2007 that offers tax relief in some of these instances.

Under normal tax law forgiveness of debt sometimes results in taxable income. This, of course, adds insult to injury for people who already have been dealing with cash flow problems. There is relief when the debt is forgiven by the lender and then when it’s time to file the next tax return its like a slap in the face when the taxpayer finds out that they have to pay taxes on the amount of debt that was forgiven as the IRS classifies the debt forgiven as income. Up to this time debt forgiveness on mortgage workouts or foreclosures was generally subject to taxation as income. Under the Mortgage Forgiveness Debt Relief Act of 2007 if your mortgage debt is partly or entirely forgiven during 2007, 2008, or 2009 you may be eligible to claim special tax relief and exclude it from taxation up to specific limitations based on your filing status, by filling out and filing Form 982 and attaching it to your federal return for that year.

There are some requirements to qualify for this special treatment. According to the IRS information available, “the debt that was forgiven must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence.” Also, “debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before refinancing”. So what this means is that for this special debt forgiveness tax relief to apply the debt must have actually been related to your principal residence, and have been secured by the debt that was forgiven. At this time it appears that home equity loans that were used to consolidate other debts, or for other purchases or to acquire cash would not be eligible for this particular debt forgiveness.

If you have mortgage debt reduced or forgiven by a lender you should receive a year end statement from the lender. It is a Form 1099-C and it should list the amount of debt forgiven and the value of the home related to the mortgage debt forgiveness. Be sure you check the information on this form for accuracy and to retain it for filing your tax returns.

In these difficult times we must make every effort to stay informed regarding any and all economic and financial opportunities to save personal funds. After all most of us have heard that famous quote by Benjamin Franklin, “a penny saved is a penny earned”.


I hope you're enjoying Tax Facts on the Taxing Subject of Taxes!

Any U.S. tax advice contained in this electronic communication was not intended or written to be used, nor can be used, by any recipient of this communication for the purpose of avoiding penalties that might be imposed pursuant to the Internal Revenue Code or U.S. Treasury Regulations, or any other state or local law or regulation.

Content of this site is not intended to replace professional consultation.
This site needs an editor - click to learn more!

Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Twitter Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Facebook Add Foreclosures+and+Mortgage+Workouts+and+Taxes to MySpace Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Del.icio.us Digg Foreclosures+and+Mortgage+Workouts+and+Taxes Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Yahoo My Web Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Google Bookmarks Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Stumbleupon Add Foreclosures+and+Mortgage+Workouts+and+Taxes to Reddit




RSS | Related Articles | Editor's Picks Articles | Top Ten Articles | Previous Features | Site Map


For FREE email updates, subscribe to the Taxes Newsletter


Past Issues


print
Printer Friendly
bookmark
Bookmark
tell friend
Tell a Friend
forum
Forum
email
Email Editor


Content copyright © 2014 by Kate Woods. All rights reserved.
This content was written by Kate Woods. If you wish to use this content in any manner, you need written permission. Contact BellaOnline Administration for details.

g


g features
The Taxing Subject of Taxes

Requesting an Extension of Time To Pay Your Taxes

Why We Pay Income Taxes

Archives | Site Map

forum
Forum
email
Contact

Past Issues
memberscenter


vote
Poetry
Daily
Weekly
Monthly
Less than Monthly



BellaOnline on Facebook
g


| About BellaOnline | Privacy Policy | Advertising | Become an Editor |
Website copyright © 2014 Minerva WebWorks LLC. All rights reserved.


BellaOnline Editor