Reporting Home Mortgage Debt Relief

Under the Mortgage Forgiveness Debt Relief Act of 2007 , any principal residence debt cancelled in the period from 2007 till 2009 can be excluded from gross income . Types of debt that qualify for this relief include debt reduced through mortgage restructuring or mortgage debt forgiven because of a foreclosure . The debt should be secured by a person 's principal residence . One more requirement is that the balance on the loan can not exceed 2 million or 1 million for a married person filing separately . If debt was refinanced , it is still possible to

apply for the exclusion , but only up to the price of the old mortgage principal prior to refinancing . Before the passage of this act such types of debt relief were reported using the standard Form 1040

`Previously , a homeowner who lost their property to foreclosure or sold their property for less than the mortgage amount could be taxed on the amount of the mortgage that was forgiven by the lender (Real Estate Snippets , 2008 , para . 2

The passage of the act is justified taking into account the catastrophic situation with household debt and housing prices bubble burst . Allowing citizens to apply for income exclusion in connection with debt relief will alleviate the conditions many Americans have found themselves in As the White House (2007 ) reports , `[t]his Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes (para . 2

Given...