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Mortgage Debt Forgiveness Calculator

Have you completed a bankruptcy that included your mortgage debt?
Answer:

You do not have to pay income tax on any debts that are discharged through bankruptcy.

Is the forgiven debt on a home that was your principal residence?
Is the property you are short selling a rental property?

You may be able to avoid declaring the forgiven debt as income through exclusions such as insolvency or bankruptcy, but with a rental property it’s probably too complicated to figure out on your own. Contact us for a free, no-obligation consultation with one of our tax experts. Call us now at 1-800-603-3525.

Answer:

You may be able to avoid declaring the forgiven debt as income through another exclusion, such as insolvency.

Is the forgiven debt from your first mortgage only?
Was the debt forgiven between January 1, 2007 and December 31, 2016?
Answer:

You are eligible to avoid declaring the forgiven debt as income under the Mortgage Debt Relief Forgiveness Act.

Go to info page on Mortgage Debt Relief Forgiveness Act

Answer:

The Mortgage Debt Relief Forgiveness Act does not apply to you. You may still be able to avoid declaring the forgiven debt as income through the insolvency exclusion.

Is the forgiven debt on a second (or other) mortgage or HELOC, and secured by the property that was your principal residence?
Answer:

The Mortgage Debt Relief Forgiveness Act does not apply to you. You may still be able to avoid declaring the forgiven debt as income through the insolvency exclusion.

Was the second (or other) mortgage or HELOC used to buy, build, or substantially improve the home?
Answer:

You are eligible to avoid declaring the forgiven debt as income under the Mortgage Debt Relief Forgiveness Act.

Go to info page on Mortgage Debt Relief Forgiveness Act

Was the second (or other) mortgage or HELOC used to refinance a mortgage that was originally taken out to buy, build, or substanially improve the home?
Answer:

You are eligible to avoid declaring the forgiven debt as income under the Mortgage Debt Relief Forgiveness Act - but only up to the amount of the old mortgage principal just before the refinancing.

Go to info page on Mortgage Debt Relief Forgiveness Act

Answer:

The Mortgage Debt Relief Forgiveness Act does not apply to you. You may still be able to avoid declaring the forgiven debt as income through the insolvency exclusion.

Are you insolvent?
Answer:

You do not have to pay income tax on the forgiven debt, up to the extent of the insolvency. You may have to pay income tax if your forgiven debt exceeds the amount of the insolvency.

Go to Insolvency Income Tax Calculator

Answer:

Unless the forgiven debt qualifies as “qualified farm indebtedness” or “qualified real property business indebtedness,” you will have to pay income tax on the discharged debt.

Use our free insolvency calculator to find out if you are insolvent, and to estimate how much tax you might have to pay on your forgiven debt.

Go to Insolvency Income Tax Calculator

Note:

The Mortgage Debt Relief Forgiveness Act does not apply to you. However, there are other exclusions which you may be able to use to avoid paying income tax on your forgiven debt.

Note:

Insolvency means the amount you owe to creditors is greater than the value of all your assets, including your retirement accounts.

Note:

For your home to qualify as “principal residence,” you must have used the home as your principal residence for at least 2 years or more during the 5 years prior to the short sale of your home.

Note:

You will be asked a series of questions to determine whether your forgiven debt is eligible be to excluded from income taxes under the Mortgage Debt Forgiveness Act.