Tax Tips for the Week of February 4, 2013

Forgiveness of debt relief still available for 2012 returns. If your home lender forgave all or part of your mortgage balance during 2012, tax relief is available. While cancellation of debt is generally taxable income, a special provision still in effect for 2012 excludes amounts forgiven on debt you used to acquire, build, or improve your main residence and that is secured by your home. The break applies to foreclosures as well as home loans your lender agrees to restructure, and in some cases, may also apply to a mortgage you refinanced. Up to $2 million of forgiven debt can be tax-free under this rule when the reason for the discharge is related to a decline in the value of your home or to your financial condition. One note: The amount you no longer have to repay still needs to be reported on your federal income tax return. Your lender will send you and the IRS an informational notice, and you'll include the total debt that was forgiven on Form 982, which is attached to your return. The amount you exclude from income reduces your basis in your home. Not sure if this exception applies to you? Other exceptions and exclusions from the general rule may help. Contact us for details: Email Us Tax Tips are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in Tax Tips or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.