If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.
The IRS reminds all taxpayers that the fair market value of property or services received through a barter is taxable income. Both parties must report as income the value of the goods and services received in the exchange.
Here are 10 key facts from the IRS about mortgage debt forgiveness:
Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. IRS forms and publications are available online at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
All e-fileable forms, including Form 982, are free with TaxACT. The program will guide you step by step through mortgage debt forgiveness and offers free help every step of the way. Start your TaxACT return now.
Additional IRS Resources:
IRS YouTube Videos:
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