It is also important to note that the total outstanding debt may not exceed the original mortgage cost plus the price of any home improvements. This provision does not usually apply to home refinances or lines of credit; however, in the case of a home refinance, the provision may apply for the amount of the original loan plus improvements. The limit on the total amount of forgivable debt is $2 million or $1 million if you are married and filing separately.
How to Take Advantage of the Debt Relief Act
When a debt is forgiven, the lender is required to provide both the homeowner and the IRS with a 1099 Form stating the total debt forgiven. The homeowner then completes a Form 982, which reflects the cancelled debt and why the debt was forgiven.
The Debt Relief Act is Set to Expire in 2012
The Mortgage Forgiveness Debt Relief Act expires on December 31st, 2012; however, it is possible that an extension will occur.
For more information regarding the the Cancellation of Mortgage Debt, visit IRS.gov.
If you are considering a debt forgiveness option in East Lansing or Lansing, please feel free to contact me with any questions that you may have. As a seasoned East Lansing realtor, I have years of experience assisting homeowners with mortgage debt related issues. If you are interested in buying or selling property in East Lansing, Okemos and the surrounding areas, visit MyRealtorRob.
