Stay Curious. Stay Connected.
MailNewsletters♡Donate Now
Sign up
*Password must be at least 8 characters and contain one uppercase letter, one lowercase letter, one number and one symbol.
Already have an account?
By submitting, you consent that you are at least 18 years of age and to receive information about MPR's or APMG entities' programs and offerings. The personally identifying information you provide will not be sold, shared, or used for purposes other than to communicate with you about MPR, APMG entities, and its sponsors. You may opt-out at any time clicking the unsubscribe link at the bottom of any email communication. View our Privacy Policy.
Sign in to your profile
Forgot Password?
New to MPR News?
Welcome back
to news
for you
Reset Password

Enter the username on file and we'll send you a code to reset your password.

Still require assistance or not sure what your User Name is?
Welcome back
to news
for you
Email Verification

A verification code has been emailed to

Still awaiting the code?
MinnEcon Blog
Paul Tosto

A tax bill for giving up your home?

Go Deeper.

Create an account or log in to save stories.

Like this?

Thanks for liking this story! We have added it to a list of your favorite stories.

I've written a lot about foreclosures, short sales and other problems connected with the housing crisis and people losing their homes. But I didn't realize until recently that a homeowner can end up owing the feds taxes on debts that are forgiven.

I came across a warning about that while researching some stuff around the issue of deed-in-lieu-of-foreclosure, where homeowners basically agree to throw the keys to the lender in exchange for the lender forgiving the remaining mortgage debt on the home.

But just because the debt is off you doesn't necessarily mean you're off the hook.

I admit I have a lot more questions than answers at this point. Let's try to pool our experiences and smarts and learn more together.

If you've had experience dealing with the tax issues around homes and debt forgiveness, please post below or contact me directly.

I haven't seen a ton written on this issue and would like to get homeowners tax people and others with first-person insights to share their perspective.

Tell us what you know and I'll write about it in a future post.

Here's what I do know: With housing prices falling and the economy sliding toward recession, Congress passed the Mortgage Debt Relief Act of 2007, which generally excludes the mortgage debt you've walked away from as taxable income in a restructuring, short sale or similar situation.

But there are limits. It's only good on your principal residence, not on the debt for a vacation home. You can only use it for debt forgiven between 2007 and 2012. And you still have to report the forgiveness to the IRS.

I haven't found any reporting or analysis on how this is working or who's using it. But I'm interested.

Here are some other key sites where I've found information.

>The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

>Good, practical web explainer on the law.

>IRS info on debt cancellation and taxes.

Any thoughts? Let me know.