Tax Tips
January 5, 2009
Will home foreclosure affect your tax bill?Are you wondering about the current status of tax laws regarding home foreclosures?
You may remember that back in 2007, when the housing crisis first became evident, Congress enacted the Mortgage Forgiveness Debt Relief Act to provide a tax break if you lost your home through foreclosure in 2007, 2008 or 2009. The Emergency Economic Stabilization Act of 2008, passed in October 2008, extended the provision through 2012.
Here's a summary of tax relief presently available for foreclosures, short sales, and debt restructuring.
Generally, you can exclude from your taxable income debt forgiveness of up to $2 million ($1 million if you're married filing separately) on certain home loans when the forgiveness is related to your financial condition or a decline in your home's value. You can claim the exclusion on fully or partially forgiven mortgage debt, as long as you used the proceeds to buy, build or improve your principal residence and the debt was secured by your home. Refinanced debt may also qualify.Your lender will send you Form 1099-C, showing the amount of debt cancelled or forgiven. That information is used to complete Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, which is attached to your tax return.
Please give us a call if you have questions regarding debt forgiveness. We're here to help you sort out the tax ramifications.
Burzenski and Company, P.C. contact: office@burzenski.com"Tax Tips" are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
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