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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 find 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 reinance debt 2. If this debt is all qualiied 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 illing out Form 982, Reduction through foreclosure.
of Tax Attributes Due to Discharge of Indebt- What about refinanced 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 reinance your home qualiies 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 reinancing, would have qualiied. 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 tax year only? used to buy, build or improve your principal
Form 1099-A, Acquisition or Abandonment
up to $2 million ($1 million for a married person The Mortgage Forgiveness Debt Relief Act of 2007 residence or reinance debt incurred for those
of Secured Property
iling a separate return). applies to qualiied debt forgiven in 2007, 2008 or purposes qualiies for this exclusion.
Borrowers whose property is foreclosed on by their
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
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Qualified 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
qualify for exclusion under a different
The debt must have been used to buy, build or abandonment, the lender has the option of issuing a return?
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 reinance 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 reinancing. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 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 qualiied or if the debt is qualiied farm indebtedness or
ill out a few lines on Form 982. What is the Mortgage Forgiveness Debt principal residence indebtedness. If you are using qualiied 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 qualiied 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 modiication of the terms of the mortgage, or fore- kept ownership of your home and modiication 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 qualified principal residence
be available. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • ness of qualiied principal residence indebtedness, indebtedness that can be excluded
from income?
See Form 982 for details. What does that mean? complete lines 1e, 2, and 10b. Attach the Form 982
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • Usually, debt that is forgiven or canceled by a lender to your tax return. The maximum amount you can treat as qualiied
Form 1099-C, Cancellation of Debt must be included as income on your tax return and • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • principal residence indebtedness is $2 million
Where can I get this form? ($1 million if married iling separately).
Borrowers whose debt is reduced or eliminated is taxable. The Mortgage Forgiveness Debt Relief
You can download the form at IRS.gov, or call
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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