What is the Mortgage Forgiveness Debt Relief Act of 2007

 

 

This is a special statutory relief which applies to debts forgiven between January 1, 2007 and December 31, 2009.

 

Usually, debt that is forgiven or cancelled by a lender must be included as income on your return and is taxable.

 

Yes, you understood that correctly. The debt written off by the lender was now taxable income!

 

The act allows exclusion of certain income realized as a result of a modificaton of the terms of the mortgage or foreclosure of the principle residence.

 

The applicable tax form is Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness