Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

Housing-Market / US Housing Jan 04, 2013 - 02:08 AM GMT

By: Submissions

Housing-Market

The Mortgage Debt Relief Act of 2007 is a temporary law that allows homeowners who have their mortgage debt reduced, either through restructuring, modification, short sale or foreclosure, not claim the forgiven debt amount as taxable income.


This law only applies to the calendar years of 2007 through 2012. The maximum amount allowed to be claimed under this Act is $2 million when filing jointly, or $1 million if filling separately. This tax relief is not available if the debt was forgiven in exchange for any services performed for the servicing company or the lender. This tax relief only applies if the debt relief was given due to the declining value of the home or financial situation of the taxpayer.

Commonly Asked Questions About The Mortgage Debt Relief Act of 2007

What Exactly Is Debt Cancellation or Mortgage Debt Relief?

When you take out a loan, you do so under the pretenses that you are going to repay that debt. Because the money is repaid, it is not considered income. However, when the debt is forgiven by the lender due to a loan modification, principal reduction, short sale or foreclosure, that initial money that was borrowed is no longer being repaid. Since it is no longer being repaid, the IRS considers this money as taxable income.

The lender will issue you a 1099-C (Cancellation of Debt) form at the end of the calendar year if you are required to claim the forgiven debt on your tax forms as income.

Are All Cancellation Of Debt Events Taxable?

No. There are specific situations where the cancellation of a debt does not entail having to claim the forgiven amount as income. These include:
• Any mortgage debt relief on the primary residence of an individual between the years 2007 and 2012.
• Any debts that are forgiven during bankruptcy.
• If you are deemed insolvent. To be seen as insolvent, your debts must exceed your assets at fair market value.
• Some debts that is associated with family farms.
• Collateralized loans. Also known as non-recourse loans, these are loans that default and the lender repossess the financed items.

Does This Apply To Mortgage Relief On My Second Home?

No. The debt relief given to the taxpayer only applies to their primary residence.

Does This Relief Apply To Any Other Debts?

No. The debt relief act does not apply to personal loans, credit card debt, auto loans, or any other type of financial lending instrument. This Act only applies to the mortgage of the primary residence of the home owner.

If My Debt Qualifies, Do I Still Have To List The Amount On My Taxes?

Yes. If you qualify under the Act to not claim the forgiven debt as income, you will still have to prepare IRS Form 982 and attach it to your tax forms for the year. It is very important that you read the instructions carefully when completing this form. Home owners that remain in the home must complete different parts of the form than those who lost their homes to foreclosure.

Author's Bio:
Brent Dev is a 23 years old  finance writer. He mostly spends his time writing blog posts and editorials with a focus on housing, mortgage loans and economy for Save on Money. You could reach him at brent@saveonmoney.org.

© 2013 Copyright Brent Dev - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in