Congress Extends the Mortgage Debt Relief Act through 2013
Excellent news for home buyers: the Mortgage Debt Relief Act has survived another day. With the New Year’s Day fiscal cliff agreement, Congress has agreed to extend the Mortgage Debt Relief Act of 2007 for another year.
Wondering how the Mortgage Debt Relief Act could affect you? Find out here:
Without this legislation, when homeowners owe a debt to a lender and that lender cancels or forgives the debt, that amount can be taxed.
The objective of the Mortgage Debt Relief Act is to provide relief to homeowners by allowing them to exclude income from the forgiven debt on their main residence. Specifically, relief is provided for mortgage debt connected with a foreclosure and reduced debt from mortgage.
The income exclusion applies to debt forgiven up to $2 million if married filing jointly and $1 million if married filing separately. This exclusion does not apply if the debt is forgiven due to services rendered or anything not related to a decline in the taxpayers financial condition or the home’s value.
For a more specific information and helpful examples, please visit the IRS website here: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
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