Ten Facts about Mortgage Debt Forgiveness

IRS TAX TIP 2010-44

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Source: www.irs.gov

This Month in Real Estate, January 2010

Each month, This Month in Real Estate provides expert opinion and analysis on real estate trends across the nation. The aim of the consumer-oriented segments is to provide real information on real estate.

http://www.youtube.com/watch?v=86KKIRA4gXg

Mortgage Interest Rates Expected to Rise in Spring

An expected rise in mortgage interest rates beginning in April may make it more difficult for some to qualify for a mortgage, or to qualify for the amount you need. Existing homeowners who want to take advantage of, and qualify for, the home buyer tax credit do not need to sell their current home right away, or at all. If you are financially ready, this is a great time to buy a home. Click the link or copy and paste it into your browser to read the article about interest rates.

http://www.realtor.org/RMODaily.nsf/pages/News2010011102?OpenDocument

Pre-Auction Open House in Parker

Pre-Auction Open House Sunday, January 10 11 AM - 4 PM at 11202 Glenmoor Circle in Parker. This is a potentially awesome opportunity to own a home near Canterbury Golf in Parker for pennies on the dollar. 2640 square feet, 3 or 4 bedroom, loft, 3 bath, full unfinished basement, backs to open space with horses grazing... in the pasture behind the property. Starting bid is $149,000. Non-distress comps range from $310k - $379k. For property details, click the link. Could use some updating, but this property is clean and move in ready.

http://tinyurl.com/y9g7wne

TAX CREDIT GUIDLINES

The IRS has spelled out guidelines for eligibility for the home buyer credit when co-borrowers purchase a property.

If you are single and buy a first-time home as a part owner, you can claim the full credit as long as you qualify for the credit.

For example: If you are a single person who qualifies for the credit and you have a co-signer or co-owner, such as a parent who does not qualify, you can still claim 100% of the credit says the IRS.

The IRS says the parent doesn’t qualify for any portion of the credit, but if the child hasn’t owned a home during the three years preceding the current purchase and can qualify based on income, he or she can be allocated the entire $8,000 credit.

When unmarried individuals co-purchase a home and only one of them is eligible for the credit, then the full $8,000 can be allocated to the eligible buyer.

Source: Internal Revenue Service www.irs.gov

"As the Denver-area housing market moves toward the end of its prime selling season, August sales were down year over year, but selling prices were relatively stable."

To read the entire article, please click on the link.

http://triangle.bizjournals.com/triangle/othercities/denver/stories/2009/09/07/daily32.html

The Denver Business Journal reports that the First Time Homebuyer tax credit is helping the housing market. Currently slated to end on December 1, 2009, there is a push by the National Association of Realtors and the National Home Builders Association to extend it into next year and expand it to all buyers. The housing market is still lagging the rest of the economy. Click the link to read the entire story.

http://www.bizjournals.com/denver/stories/2009/08/31/story15.html?t=email_story