{"id":18315,"date":"2012-04-12T16:19:58","date_gmt":"2012-04-12T21:19:58","guid":{"rendered":"http:\/\/deafnetwork.com\/wordpress\/?p=18315"},"modified":"2012-04-14T17:53:42","modified_gmt":"2012-04-14T22:53:42","slug":"mortgage-debt-forgiveness-by-howard-knight","status":"publish","type":"post","link":"https:\/\/deafnetwork.com\/wordpress\/blog\/2012\/04\/12\/mortgage-debt-forgiveness-by-howard-knight\/","title":{"rendered":"Mortgage Debt Forgiveness by Howard Knight"},"content":{"rendered":"

Mortgage Debt Forgiveness by Howard Knight<\/strong><\/p>\n

Housing Bust Tax Exemption Ends 2012<\/p>\n

Since the housing bust of 2007, many homes in various parts of the country are upside down on their loans. This happens when owners owe more debt than what the house can be sold for. This forces owners to stay and try to recover their paper loss over time or sell it at a loss and pay the remaining mortgage balance to the bank. Some people have restructured their mortgage loans which forgives part of their debt. And others have turned in their keys to the bank and walked out of their mortgage crisis.<\/p>\n

When a person restructures their mortgage loan or forecloses on their home, pre-2007 tax rules that any debt forgiven by the banks becomes a taxable gain. This previously forced owners to face an ugly tax liability that no one may have told you about.<\/p>\n

Forgiveness of debt is reported by the lender on Form 1099-C, Cancellation of Debt, and then reported on Form 1040 as taxable income. So, for instance, $100,000 in debt forgiveness could trigger a tax liability between $15,000 and $20,000. But don\u2019t worry yet.<\/p>\n

Fortunately, the Mortgage Forgiveness Debt Relief Act of 2007 allows a tax wavier on mortgage debt forgiven between the years 2007 to 2012. The original debt must have been used to buy, build, or remodel your main home. So, refinanced home loans to pay off credit cards, buy a new car, etc. are not exempt from tax relief. There is also a $2,000,000 limit if a married couple is filing jointly. It is recommended that you seek professional advice before pursuing this.<\/p>\n

So, if you are thinking about resolving your mortgage issues where debt forgiven or cancelled, then this is the year to do it! Year 2012 is the last year to claim a tax exemption on mortgage debt forgiveness which can save you thousands of dollars.<\/p>\n

Howard Knight is the principal at Howard Knight CPA firm that specializes in individual, small business, and non-profit tax returns. To comment on this article, he can be reached at hk@howardknight.com or http:\/\/www.howardknight.com<\/a>. (Note: He is deaf and communicate on videophone; you can call him at 713-568-3380)<\/em><\/p>\n

CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication, including attachments and\/or links, is not intended or written to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by Internal Revenue Code or applicable state or local tax law provisions or for promoting, marketing or recommending to another party any tax-related matters addressed herein.<\/p>\n","protected":false},"excerpt":{"rendered":"

Mortgage Debt Forgiveness by Howard Knight Housing Bust Tax Exemption Ends 2012 Since the housing bust of 2007, many homes in various parts of the country are upside down on their loans. This happens when owners owe more debt than…<\/p>\n

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