Real Estate Tax Talk / Inman News Article

March 23, 2012

In Ten things about debt forgiveness by Stephen Fishman, Tax Expert, Attorney, and Author, gives some useful information about the limitations and tax consequences involved after a mortgage debt is forgiven.

Income tax after debt forgiveness

 

Inman News,Taxes after Foreclosure,Mortgage Forgiveness Debt Relief Act of 2007

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In 2007, the Mortgage Forgiveness Debt Relief Act made it possible to exclude up to $2 million of a forgiven debt from your taxable income, $1 million for a married person filing separately. This means that you don’t have to pay income tax on a forgiven debt.

What qualifies

This law also covers second and third mortgages, which have been used to buy or substantially improve principle residences.

Debts forgiven on second homes, rental property, business property, credit cards or car loans do not qualify for the tax-relief provision.

Inman News,Taxes after Foreclosure,Mortgage Forgiveness Debt Relief Act of 2007

Photo Courtesy of iStock

Check out the full article linked above.

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