Help in Time of Need: IRS Mortgage Debt Relief Act

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While it seems as though the government does not often give breaks when it comes to paying taxes, there has been some IRS mortgage debt relief act that the legislature has passed to help people living in the struggling economy today. The program is an IRS mortgage debt relief that was designed specifically to help homeowners who need help with their mortgage payments and who can now refinance without being penalized. 

Previously, if a homeowner refinanced their home or saved money through forgiveness payments by the mortgage company, they still had to pay taxes on what the government saw as extra income. The person would have to pay more on their income tax return since it would put them in a higher tax bracket. This put the individual who was already having financial difficulty further behind financially, so the government decided to take action to help this type of individual in the faltering economy and provide IRS mortgage debt relief.

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Why It Helps

The IRS mortgage debt relief helps the individual at tax time so that the money they was forgiven or gained through refinancing the home does not count as income in general. The person does not move into a different tax bracket, but the savings must still be recorded on Form 982 to the government. One big exception to this is if the forgiveness was in relation to a second home or a second mortgage, meaning these would still count as extra income that year.

Although the act passed in 2007, the IRS mortgage debt relief is still good for the years 2008 and 2009. The IRS mortgage debt relief that was created in 2007 will most likely be extended or at least revised since the economy is still struggling and people are still needing some financial help. If you think the tax break applies to you and you do your own taxes, you will have to educate yourself in order to get the savings. Often, you will notice that the tax software has Form 982 in it, but you might not be totally sure how you can use it or whether you can benefit from it.

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