Common Questions for the
MORTGAGE FORGIVENESS DEBT RELIEF ACT
Will this the Mortgage Forgiveness Debt Relief Act allow me to reduce my mortgage?
No, this Act relates to tax relief from any forgiven debt. There are several ways to get relief from your mortgage payment, but this Act does not serve that purpose. Contact our office at 312-957-4489 for a free discussion.
What is the Mortgage Forgiveness Debt Relief Act of 2007?
The Mortgage Forgiveness Debt Relief Act of 2007 allows the non-taxability of any mortgage debt on your home that has been "forgiven" or "cancelled". Before this Act, this forgiven debt was considered taxable income. This Act provides tax relief, not mortgage forgiveness.
Does this Act help me stop foreclosure on my property?
The Mortgage Forgiveness Debt Relief Act is not a protection from foreclosure. Foreclosure, by the way, does not give you "forgiveness" of your mortgage loan. Contact us at 312-212-1000, or a local attorney immediately.
Does the Mortgage Forgiveness Debt Relief Act apply to all cancelled debts?
No, the Act applies only to forgiven or cancelled debt used to buy, build or substantially improve your principal residence, or to refinance debt for the same purposes.
Do I need to file Chapter 7 bankruptcy, or can I avoid bankruptcy?
Bankruptcy is an option, but you may have several options. But the Mortgage Forgiveness Debt Relief Act is not an alternative to Bankruptcy. Whether you need bankruptcy requires a conversation with an attorney. Call us at 312-957-4489 for a free discussion on your options.
When Does this Act Apply?
It applies to qualified debt forgiven in 2007, 2008 or 2009.
Do I have to report this on my return?
Yes you do. The amount of debt forgiven must be reported on Form 982, which must be attached to your tax return. Failure to report it could result in additional tax later.
How do I know or find out how much was forgiven?
Your lender must send a Form 1099-C, Cancellation of Debt, by January 31 of the following tax year. The amount of debt forgiven or cancelled will be shown in Box 2.
Can I exclude debt forgiven on my second home, timeshare, or motor home?
No. This only applies to debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes.
Is there a limit on the amount of forgiven debt that is excludable from income?
The qualified amount has no dollar limit if the principal loan amount forgiven was less than $2 million ($1 million if married filing separately for the tax year).
Can businesses qualify for this tax relief?
No, the Mortgage Forgiveness Debt Relief Act applies to individuals only. However, businesses can get relief from taxes in several other ways. There is even relief for Payroll back taxes. Contact us at 312-957-4489 for free consultation on your many options.
