Mortgage Forgiveness: Good News Regarding Tax Liability on Forgiven Debt
A lot of homeowners have found themselves in default over the last few years. Changes to the economy and the housing market were to blame for this. Bank of America is working to do something about this problem. A mortgage forgiveness program may help many homeowners. This program offers mortgage principal reduction for thousands of homeowners.
While the federal exemption amount is up to $2 million, the California exemption is up to $800,000 and forgiven debt up to $500,000. Now, I know you’re thinking… what is a “Qualified principal residence.” This means that only the debt incurred in connection with acquiring, constructing, or substantially improving a principal residence is the subject of this legislation.
Principal residences are where you actually reside, receive mail and inhabit for all intents and purposes. This new debt forgiveness exemption will include first and second trust deeds, as well as debt incurred in connection with a refinance loan to the extent that that fund from said loan were used to payoff a previous loan that would have also qualified under Senate Bill 401′s guidelines.
In order to make the application process uncomplicated a number of things must be done. Together with your application you must include: pay slips, insurance policies, utility bills and even tax returns slips. All of these must be attached to the Housing Affidavit that must accompany any application. You must also seek the services of a modification representative to assist you with the application.
A very important thing to note is that taxpayers who are bankrupt are exempt from debt relief income tax. This means, that they have no liability. Also, taxpayers who are insolvent and have no assets may also claim exemption from debt relief income tax to the extent their current liabilities exceed current assets.
Learn more about Obama Mortgage Relief Plan Qualifications.
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