Tax Debt Relief Act
The Tax Debt Relief Act is technically termed the Mortgage Debt Relief Act of 2007. In short, if an individual owes someone else money, and the lender forgives or cancels the debt, the forgiven debt may be taxable. Under the Mortgage Debt Relief Act of 2007, taxpayers are able to exclude income from discharged debts occurring on their principal residence. For example, if a lender restructures a mortgage to make it more affordable to the homeowner, the amount of mortgage forgiven will qualify for this relief.
First of all you have to know if or not you are an eligible candidate for this mortgage forgiveness act’s exclusions. As per the norms set by the Internal Revenue System for acquiring IRS debt relief and for becoming eligible for this act, your debts should be forgiven on the principal amount which is the original value of your home. The second precondition to be eligible for this act is that the mortgages of a tax payer should be forgiven due to a valid reason such as loss of job or short sale of ones home. Another important prerequisite is that the debts need to be forgiven within a fixed time frame that includes the dates 1st January 2007 to 1st January 2010. The last important precondition for coming out as eligible for this act is that the entire debt forgiveness needs to be on mortgage that was used to purchase the house.
The second area covered by tax debt relief act is nontaxable income or debts. There are various situations in which debt cancellation is considered as nontaxable. Any property which is qualified principal falls under the Mortgage Debt Relief Act 2007. Two kinds of debts that are considered as nontaxable include insolvency-included debts and bankruptcy. Various other debts that are considered as nontaxable include farm debts, non-recourse loans and others.
The Mortgage Forgiveness Debt Relief Act is a law that was passed by the United States Congress in December 2007. Because of the growing economic crisis, including millions of foreclosures around the country, it became necessary for the federal government to intervene. Typically, when a lender forgives part of a debt that is owed, that portion is taxed as income to the borrower. The Mortgage Forgiveness Debt Relief Act allows lenders to forgive that extra amount owed with no adverse financial consequences to the borrower.