Mortgage Tax Forgiveness Act of 2007
With the growing number of homes lost to foreclosure and the increasing gap between high mortgage amounts and low real estate values, many Americans who lose their home to foreclosure face significant remaining liabilities. They may also face a large deficiency judgment based upon the amount of money still owing after the banks repossess and sell their homes.
In response to this widespread problem, the government passed the Mortgage Debt Forgiveness Act of 2007. The Act, which was set to expire at the end of last year, has been extended through the end of this year. The Act excludes debt forgiveness from gross income on the loss of a qualified residence, so long as the debt was utilized to purchase, build or substantially improve the qualified residence.
This allows debt forgiveness from the loss of a residence or a short sale with no deficiency to be excluded from income so long as the debt was not utilized for some purpose other than the purchase or improvement of the home. This law is a powerful rule for the benefit of homeowners who manage to obtain debt forgiveness from a bank on a family residence lost to foreclosure, short sale or a deed-in-lieu transaction.
The Act does not apply to non-real estate forgiveness, forgiveness on a non-residence or mortgage money not used to purchase or improve the residence. Refinance money used for costs of living or the retirement of other debt, often credit card indebtedness, does not qualify.
Contact a Lawyer About the Act and Your Tax Debt
To properly understand and take full advantage of this tax relief, be certain to seek the early assistance of a tax professional or experienced attorney like those at the Law Offices of Neil Crane, LLC. We've provided sound and invaluable advice to consumers in serious financial difficulties since 1983.
To learn how this law can be used to tax relief and short sale success, call us at 203-230-2233, call us toll free at 1-888-249-3027 or contact us online. We have office locations in Hamden, Bridgeport, Ridgefield, Waterbury and Rocky Hill, Connecticut. Your first consultation is free of charge.
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