Can You Benefit From The Mortgage Forgiveness Debt Relief Act?

Historically, any discharge of a debt or other relief from debt was taxable as income. Consequently, mortgage debt that was forgiven by a lender as part of a principal reduction, short sale or foreclosure had to be reported as taxable income by the homeowner. The Mortgage Forgiveness Debt Relief Act of 2007 changed the rules so taxpayers are no longer required to recognize this debt forgiveness as income.

Contact Bucci Law Offices if you had your principal reduced, sold your home in a short sale or lost your home to foreclosure. We will help you take advantage of the Mortgage Forgiveness Debt Relief Act so you do not end up paying income tax on the debt forgiveness. Call our offices in Fort Lauderdale at 954-900-9107 or Miami at 305-340-2275 to schedule a consultation with one of our tax lawyers.

What Is The Mortgage Forgiveness Debt Relief Act?

With the encouragement of lenders, a large majority of homeowners purchased homes that were appraised and sold at much greater amounts than their actual value. Congress enacted the Mortgage Forgiveness Debt Relief Act to relieve the burden on taxpayers created by lender interest and abuse. Since its enactment, taxpayers have been able to exclude up to $2 million of debt forgiven on their principal residences ($1 million for a married person filing a separate return).

The Mortgage Forgiveness Debt Relief Act of 2007 has provided great relief to many struggling homeowners who would have otherwise suffered an enormous tax consequence as a result of the forgiveness of their mortgage debt.

Although the act was originally set to expire at the end of 2010, the Emergency Economic Stabilization Act of 2008 extended this tax relief until Dec. 31, 2012. The act was extended further, until the end of 2014, as part of the American Taxpayer Relief Act. The goal of this legislation has been to allow the borrower and lender to work freely to find a common solution beneficial to the financial status of both parties by enabling taxpayers to exclude debt reduced through mortgage restructuring as well as mortgage debt forgiven in a foreclosure.

Did You Receive A 1099-C, Cancellation Of Debt, From Your Lender?

If you have had debt reduced or eliminated, do not be surprised if you receive Form 1099-C, Cancellation of Debt, from your lender. Your lender is legally required to send a Form 1099-C to show the amount of debt forgiven as well as the fair market value of any property foreclosed upon.

In a short sale, the lender agrees to accept less than the total amount due under the mortgage. Please note that not all owners or all properties will qualify for relief. If you qualify, to benefit from relief you must complete Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, to claim your special exclusion and attach it to your federal income tax return, Form 1040, for the tax year that the qualified debt is forgiven.

The tax lawyers at Bucci Law Offices can help you analyze the potential tax consequences of your real estate transaction and determine if you qualify for tax relief, as well as other options that may be more suitable to avoid future tax problems. Bucci Law Offices will be your tax advocate and fight for your rights.

How Can The Tax Attorneys At Bucci Law Offices Help?

Dealing with the IRS alone can be daunting; often you end up with nothing more than increased interest and penalties assessed against you, in addition to the tax liability you already have. Why not instead have one of our tax lawyers, who will become your trusted partner, negotiate with the IRS on your behalf and help you get the results you need?

The tax attorneys at Bucci Law Offices have more than 18 years of experience fighting the IRS and can navigate through their rules and regulations while advising you of your best possible options for resolving your IRS problems given your particular circumstances.

Do Not Wait To Get Legal Help

Remember, IRS problems do not simply disappear, and they always require immediate attention. Do not wait until it is too late. You need someone in your corner to protect your rights and interests — a tax lawyer from Bucci Law Offices can do just that. Contact Bucci Law Offices We handle cases throughout Florida and worldwide. Call us today to schedule a consultation.