A Reminder - Mortgage Workouts Are Now Tax-Free for Many Homeowners

We just wanted to remind folks about the Mortgage Forgiveness Debt Relief Act of 2007, whereby homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief by filling out the "revised" Form 982 and attaching it to their 2007 federal income tax return. Under the new law, taxpayers may exclude mortgage debt forgiven on their principal residence if the balance of their loan was less than $2 million ($1 million for a married person filing a separate return). It applies to mortgage debt forgiven in a mortgage restructuring as well as mortgage debt forgiven in connection with a foreclosure.

The IRS is "urging people with mortgage problems to take full advantage of this valuable tax relief" and has provided details and instructions for proper filing at www.irs.gov/index.html.

Borrowers whose mortgage debt was reduced or eliminated should have received a year-end statement (Form 1099-C) from their lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure. The IRS recommends borrowers check the Form 1099-C carefully and notify the lender immediately if any of the information shown is incorrect or if they have not yet received the Form from their lender.

Guidelines for the New Mortgage Forgiveness Debt Relief Act include:

• The debt must have been used to buy, build or substantially improve the taxpayer's principal residence and must have been secured by that residence.
• Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.
• Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.
• In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

Be sure to check with your accountant or tax advisor for more specific details on eligibility and to be certain you are taking full advantage of the tax relief provided for under this New Act.

Metro Mortgage Company is a federally regulated Mortgage Banker specializing in Conventional, Jumbo and FHA/VA mortgage loans throughout Florida. Call us today at 888-617-3674.

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