Just a reminder that President Bush signed into law the end of last year, a new measure that gives tax breaks to homeowners who have a mortgage debt forgiven. Prior to this new measure, if your lender forgave part of your debt under a short sale or refinance, you were responsible to pay income tax on that debt. Under the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does NOT have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.
This tax break applies to debts discharged from January 1, 2007 until December 31, 2009. This applied to principal residences up to $2 million for refinances. To read the full text of this Act, go to http://www.govtrack.us/congress/bill.xpd?bill=h110-3648
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