Homeowners with forgiven loan debt get timely tax break

Sandra Block reports:

Families who lost their homes to the foreclosure crisis this year will have at least one reason for cheer this holiday season: They won’t have to worry about a big tax bill.

Shortly before adjourning last week for the year, Congress approved a tax-relief bill designed to help families who had a portion of mortgage debt forgiven. Some families have had such debt forgiven through a foreclosure, a short sale or a loan restructuring that enabled them to stay in their homes. (In a short sale, a home is sold for less than the amount of the loan.)

Ordinarily, forgiven debt is treated as taxable income. In the past, families who lost homes because they couldn’t afford mortgage payments were sometimes stuck with a huge tax bill.

The tax “is a double whammy, and it’s kind of a surprise whammy,” since most don’t realize that forgiven debt is taxable, says Mel Schwarz, partner at Grant Thornton’s national tax office.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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