Home / Uncategorized / The Mortgage Debt Relief Act Prevents You From Getting Taxed on Discharged Mortgage Debt

The Mortgage Debt Relief Act Prevents You From Getting Taxed on Discharged Mortgage Debt

The Mortgage Debt Relief Act of 2007  – which was extended through 2012 – allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring and mortgage debt forgiven in connection with a foreclosure also qualifies for the relief.

So, if you filed for bankruptcy in Michigan in 2011 and received a 1099 from your former mortgage lender – don’t panic. Just make sure your income tax preparer is aware of the law. Or – if you do you own taxes (not such a good idea in my opinion) make sure you fill out your forms properly so that you don’t get hammered with an unforeseen tax bill.