Category Archives: Mortgage Forgiveness Debt Relief Act
There are many of us who do not have adequate knowledge about the Mortgage Forgiveness Debt Relief Act that allows taxpayers to eliminate up to $2 million of mortgage debt on their principal residence in 2007, 2008 or 2009.
Mortgage forgiveness is quite a familiar term in the real estate market. Due to a person’s financial problems, when a mortgage lender has agreed to accept less than the full amount of the debt, the difference between the amount payable and the amount accepted is “forgiven”.
When the mortgage lender has agreed to waive off a certain portion of the loan, they will send a 1099–C form showing the forgiven debt. You need to show that amount as a taxable income and combine with your earned income and wages. For example, if $20,000 of your mortgage loan was forgiven, you should be adding this amount with your earned income when filing taxes for that year. You end up owing the IRS a large amount at the next tax term.
According to the laws of the Mortgage Forgiveness Debt Relief Act, you can eliminate the forgiven amount up to $2 million from your taxable income. The amount forgiven will still be treated as an income but you don’t have to pay taxes on it.
In order to claim this mortgage debt relief, you need to show the amount forgiven to the IRS. Take good notes and contact the lender before tax time to get the documentation you need.
For more information about Mortgage Forgiveness Debt Relief Act, you can go through the article: http://www.irs.gov/individuals/article/0,,id=179414,00.html