Program 3648


Mortgage Debt Relief Act (HR 3648)- Will it help you?

As more and more people are contemplating the possibility of foreclosure or a short sale on their homes, many feel ”safe” that they may not owe taxes following the forgiveness of the debt by their lender(s). Be sure you do your homework, carefully. Hiring a short sale specialist to help you negotiate the terms with your bank is important. Many terms are negotiable with the lender, and you must know what to ask for to protect yourself. Protect yourself from what you ask? From recourse, deficiency judgements or tax bills. Further, you must know what this Mortgage Debt Relief Act really means. It is not the cure-all and it is not even an option for all. It does not encompass all “mortgage debt,” so be careful. Take very careful note as to who this Act will help, and/or who it will not. If you have refinanced your mortgage, have a second, a third or if this is an investment property – you may or may not fall under the protection of this act.

As always, enlist the counsel of an experienced attorney and for tax implications, get expert advice from an income tax professional (CPA). (Posted by: Catherine Myers | January 22, 2008)

Here is an excerpt from a White House press release about this Act for more information: IRS link about Mortgage Debt Forgiveness and Debt Cancellation

 

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

 

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

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 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 exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

 


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This easy-to-read guide introduces you to a new Federal law that brings relief to those facing foreclosure and describes the options available to you.

Call your local Certified Program HR3648 Representative Richard Burk at 518-232-7720 OR submit the request form below. There is no cost or obligation for this free, public information. 

 

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