Chuck Z asked:
Recently, there was talk that the IRS was changing its rules so that debt relief experienced by persons who lost their homes to foreclosure would no longer be taxed. What’s the status on this rule change?
Recently, there was talk that the IRS was changing its rules so that debt relief experienced by persons who lost their homes to foreclosure would no longer be taxed. What’s the status on this rule change?
It passed.
Criteria:
Cancelled in 2007,8,9 only.
Taxpayer not in bankruptcy.
Lived in/Owned it for 2 years as main home.
Debt less than $2Million.
Money was only from buying, building or improving home.
(No cashouts).
Any money not included in income is deducted from basis of house (but not below zero).
See form 982. (If you don’t use the form, it’s considered other income.)
Mortgage foreclosure is still considered to be taxable by the IRS.
See this link.