Mortgage Debt Relief
Important Information That May Help You!
Learn why mortgage debt relief has become a popular topic lately with so many people, especially with the recent economic downturn that has affected so many people.
The main priority for most people is to make their mortgage payments, but even that has been tough for many people and many are looking for a mortgage debt reduction plan that can provide them some legal debt relief.
Is Mortgage Debt Relief An Option?
In some cases, lenders will forgive the mortgage debt, which definitely sounds beneficial. However, lenders have to report this canceled debt to the IRS, which may leave you with tax liabilities for that forgiven debt.
The good news is that with the debt relief act of 2007, there are times when you may be able to enjoy a debt free mortgage without having to pay the taxes on the forgiven part of that debt.
In most cases, when debt is forgiven or canceled, it is considered to be income that you have to pay taxes on. However, the Mortgage Debt Act of 2007 helped to change this, providing home owners with debt relief. Some mortgage debt that has been discharged may not be excluded from taxable income.
Usually you can exclude $2 million dollars if you file as an individual. Married couples that are filing separately are able to exclude up to $1 million from their taxable income.
However, while this does provide legal debt relief to some, there are some exclusions as well. Not every forgiven mortgage debt is going to qualify and this mortgage debt reduction plan is only going to last until 2012.
One area where you may receive some relief is if you have refinanced a mortgage. Mortgage debt that has been refinanced does qualify for this debt relief option, but only the principal balance of the first mortgage can qualify for the exclusion.
This means that if your original mortgage was $100,000 and you refinanced for a higher amount later, even if you were forgiven a higher amount, you can only exempt the original $100,000 from your taxes. However, the rest of the forgiven debt will still be considered income. Still, the debt relief act does provide a hefty discount to those who have refinanced mortgages.
While you can benefit from this debt relief on your first home, if you have a mortgage on a second home canceled, this one is not going to be qualified for exclusion from your income.
However, there still may be some options for legal debt relief if you happen to use that home as a rental property. There are other options for tax relief that you may find if that second home is being used as a rental property.
While the Mortgage Debt Relief Act of 2007 may seem pretty simple, you may want to contact a tax professional before doing your taxes if you are unsure if you qualify for these exclusions.
For many homeowners today, this mortgage relief option is definitely going to prove helpful and may help you enjoy the benefits of a debt free mortgage without being penalized on your taxes.
Return from Mortgage Debt Relief to Debt Relief Programs!
Return from Mortgage Debt Relief to Debt Elimination