Losing a home? A tax bite may be next
January 7, 2010
MSNBC – U.S. foreclosure filings have soared in recent years. In 2009, RealtyTrac estimates, 3.9 million foreclosure notices were sent to American homeowners unable to make their payments, up nearly 22% from 2008.
It’s a terrible problem, emotionally wrenching for many families. And, as if losing your home isn’t bad enough, you may also get slammed by the U.S. tax code. Here’s where the hit could hurt and how to minimize the pain.
Debt relief and a tax break
The basic tax rule on debt discharge is simple: If a lender cancels your debt, that’s taxable income to you, and you and the Internal Revenue Service will get a 1099-C form, and you will have to pay tax on that forgiveness.
But Congress gave homeowners a big gift with the Mortgage Forgiveness Debt Relief Act of 2007. It excludes as much as $2 million in debt relief from income taxes through 2012.
Read the entire article here.
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