Mortgage Forgiveness & TaxesPosted on December 13, 2011 in Arizona Law Regarding Business and Real Estate
When your lender reduces and “forgives” debt, it used to send a Form 1099 for the amount of reduced or forgiven debt. This amount needed to be included as income on your tax return. It is often called phantom income. But, because of new law, there’s a big exception when it comes to mortgage debt secured by your primary residence.
The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude from your income the debt that’s left over after a foreclosure. The law applies for the calendar years 2007 through 2012.
You can find more information about the act in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, as well as in IRS news release IR-2008-17.
Call long-time Scottsdale, Arizona attorney William A. Miller for more information at 602.319.6899.
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