The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
July 26, 2011
For most individuals, a foreclosure will result in a Cancellation of Debt (COD) by the lender. Normally, debt that is forgiven or cancelled by a lender must be included as income on tax returns and is taxable.The Mortgage Debt Relief Act of 2007 was enacted to allow taxpayers to exclude up to $2 million (if married filing jointly) of income from the cancellation of debt on their principal residence in 2007 through 2012. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. All forgiven debt must be reported on IRS Form 982and attached to your tax return. Second homes and investment properties do not qualify for the Mortgage Debt Relief Act and any cancellation of debt may be taxable.
To learn more about the new Estate and Gift Tax Exemption, give Wallace & Associates a call today at .
