Can a homeowner whose mortgage debt was forgiven in 1997 claim for a special tax relief?
Yes, by filling out Form 982 of the U.S. Internal Revenue Service and attaching it to their 2007 federal income tax return, homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be able to claim special tax relief. Under the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. The limit is $1 million for a married person filing a separate return. The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax relief program.
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