President Bush signed into law today a new measure giving tax breaks to homeowners who have mortgage debt forgiven. Under preexisting law, the debt forgiven by a lender, such as for short sales and refinances, was generally taxable to the borrower as debt discharge income. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.
This tax break applies to debts discharged from January 1, 2007 to December 31, 2009. Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the residence (up to $2 million for refinances).
For purposes of calculating capital gains, any debts discharged excluded from income under the new law must be subtracted from the basis of the taxpayer's principal residence (but not below zero). However, taxpayers may generally exclude from capital gains income up to $250,000 (or $500,000 for married couples filing jointly) for properties owned and used as their principal residence for at least two of the last five years.
For a copy of the Mortgage Forgiveness Debt Relief Act of 2007, go to http://www.govtrack.us/congress/bill.xpd?bill=h110-3648.
Brought to you by the CALIFORNIA ASSOCIATION OF REALTORS®
Friday, December 21, 2007
Tuesday, December 04, 2007
INFORMATION FOR TAXPAYERS IN FORECLOSURE
Provided courtesy of the Internal Revenue Service
The IRS has developed information and Web resources to assist taxpayers with the tax issues presented by foreclosure.
Key Points:
*The Internal Revenue Service unveiled a special new section on www.IRS.gov for people who have lost their homes due to foreclosure.
*The IRS also reassured homeowners that although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.
Resources:
*IRS 2007-159 – The news release IR 2007-159 provides additional background. The
news release and FAQs can also be found at http://www.irs.gov/newsroom/article/0,,id=174022,00.html
The direct link to the FAQ’s is http://www.irs.gov/newsroom/article/0,,id=174034,00.html
The IRS has developed information and Web resources to assist taxpayers with the tax issues presented by foreclosure.
Key Points:
*The Internal Revenue Service unveiled a special new section on www.IRS.gov for people who have lost their homes due to foreclosure.
*The IRS also reassured homeowners that although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.
Resources:
*IRS 2007-159 – The news release IR 2007-159 provides additional background. The
news release and FAQs can also be found at http://www.irs.gov/newsroom/article/0,,id=174022,00.html
The direct link to the FAQ’s is http://www.irs.gov/newsroom/article/0,,id=174034,00.html
Subscribe to:
Posts (Atom)