Mortgage Forgiveness Debt Relief Act of 2007

A few months ago, Congressman Sander Levin spoke on the floor of the United States House of Representatives in support of the Mortgage Forgiveness Debt Relief Act of 2007. 

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through loan modification agreements, mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The tax exclusion does not apply if the discharge is due to services performed for hard-money lenders or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition. More tax rules for foreclosures and debt settlement information, including detailed examples can be found in Publication 4681, Canceled Debts, Home Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

Tags: , , ,

Comments are closed.