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This brochure is intended to inform homeowners whose mortgage
debt was partly or entirely forgiven about a special tax relief
provision. These homeowners may be eligible to exclude the amount
Does the Mortgage Forgiveness Debt How do I know or nd out how much
forgiven from their taxable income. Relief Act of 2007 apply to all forgiven or
was forgiven?
cancelled debts? Your lender should send a Form 1099-C,
Mortgage Workouts, Now Tax-Free for their lender. The lender is required to furnish this No, the Act applies only to forgiven or canceled Cancellation of Debt, by January 31. The amount
Many Homeowners form to the borrower by January 31. By law, this debt used to buy, build or substantially improve of debt forgiven or cancelled will be shown in box
Homeowners whose mortgage debt was partly form must show the amount of debt forgiven and your principal residence, or to renance debt 2. If this debt is all qualied principal residence
or entirely forgiven may be able to claim special the fair market value of any property given up incurred for those purposes.• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • indebtedness, the amount shown in box 2 will
tax relief by lling out Form 982, Reduction through foreclosure.
of Tax Attributes Due to Discharge of Indebt- What about renanced homes? generally be the amount that you enter on lines 2
edness, and attaching it to their federal income Borrowers need to check the Form 1099-C carefully. Debt used to renance your home qualies for this and 10b, if applicable, on Form 982.
tax return. Notify the lender immediately if any of the information exclusion, but only up to the extent that the • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
shown is incorrect. Borrowers should pay particular principal balance of the old mortgage, immediately
Normally, debt forgiveness results in taxable attention to the amount of debt forgiven (Box 2) and before the renancing, would have qualied. Can I exclude debt forgiven on my
income. But under the Mortgage Forgiveness the value listed for their home (Box 7). second home, credit card or car loans?
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Debt Relief Act of 2007, taxpayers may exclude • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Does this provision apply for the 2007 Not under this provision. Only canceled debt
certain debt forgiven on their principal residence Form 1099-A, Acquisition or Abandonment tax year only? used to buy, build or improve your principal
up to $2 million ($1 million for a married person of Secured Property The Mortgage Forgiveness Debt Relief Act of 2007 residence or renance debt incurred for those
ling a separate return). Borrowers whose property is foreclosed on by their applies to qualied debt forgiven in 2007, 2008 or purposes qualies for this exclusion.
See the instructions for Form 982 for more lender may receive a Form 1099-A. If the home was 2009. The Emergency Economic Stabilization Act • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
details. foreclosed on or repossessed, it is considered a sale of 2008 extended the treatment through the year If part of the forgiven debt doesn’t
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • of the property. The borrower may have a reportable 2012. qualify for exclusion from income under
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Qualied Principal Residence gain on the disposition. If in the same calendar year, If the forgiven debt is excluded from this provision, is it possible that it may
Indebtedness debt is canceled in connection with a foreclosure or income, do I have to report it on my tax
The debt must have been used to buy, build or abandonment, the lender has the option of issuing a return? qualify for exclusion under a different
substantially improve the taxpayer’s principal Form 1099-A and a Form 1099-C or combining all Yes. The amount of debt forgiven must be reported provision?
residence and must have been secured by that the required information on a Form 1099-C only. on Form 982 and the Form 982 must be attached Yes. The forgiven debt may qualify under the
“insolvency” exclusion. Normally, a taxpayer is
residence. Debt used to renance qualifying See Publication 523, Selling Your Home, for to your tax return. not required to include forgiven debts in income
debt is also eligible for the exclusion, but only up more information.
to the amount of the old mortgage principal, just Do I have to complete the entire • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • to the extent that the taxpayer is insolvent. A
before the renancing. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Form 982? taxpayer is insolvent when his or her total liabilities
Debt reduced through mortgage restructuring, FReQueNTly ASkeD QueSTIoNS oN Form 982, Reduction of Tax Attributes Due to exceed his or her total assets. The forgiven debt
as well as mortgage debt forgiven in connection THe MoRTgAge FoRgIveNeSS Discharge of Indebtedness (and Section 1082 may also qualify for exclusion if the debt was
with a foreclosure, may qualify for this relief. In DebT RelIeF ACT Adjustment), is used for other purposes in addition discharged in a Title 11 bankruptcy proceeding
most cases, eligible homeowners only need to to reporting the exclusion of forgiveness of qualied or if the debt is qualied farm indebtedness or
ll out a few lines on Form 982. What is the Mortgage Forgiveness Debt principal residence indebtedness. If you are using qualied real property business indebtedness. If
Relief Act of 2007? the form only to report the exclusion of forgiveness you believe you qualify for any of these exceptions,
Debt forgiven on second homes, rental property, The Mortgage Forgiveness Debt Relief Act of 2007 of qualied principal residence indebtedness as see the instructions for Form 982.
business property, credit cards or car loans was enacted on December 20, 2007. Generally, the the result of foreclosure on your principal residence, • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
does not qualify for the new tax-relief provision. Act allows exclusion of income realized as a result of you only need to complete lines 1e and 2. If you
In some cases, however, other kinds of tax modication of the terms of the mortgage, or fore- kept ownership of your home and modication of Is there a limit on the amount of
relief, based on insolvency, for example, may closure on your principal residence. the terms of your mortgage resulted in the forgive- forgiven qualied principal residence
be available. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • ness of qualied principal residence indebtedness, indebtedness that can be excluded
See Form 982 for details. What does that mean? complete lines 1e, 2, and 10b. Attach the Form 982 from income?
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Usually, debt that is forgiven or canceled by a lender to your tax return. The maximum amount you can treat as qualied
Form 1099-C, Cancellation of Debt must be included as income on your tax return and Where can I get this form?• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • principal residence indebtedness is $2 million
Borrowers whose debt is reduced or eliminated is taxable. The Mortgage Forgiveness Debt Relief You can download the form at IRS.gov, or call ($1 million if married ling separately).
receive a year-end statement (Form 1099-C) from Act of 2007 allows you to exclude certain canceled 1-800-829-3676. If you call to order, please allow
debt on your principal residence from income. 7-10 days for delivery.
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