Mortgage Foreclosure & Refinance Resource

Update: 1/31/2008: In a related tax issue, this has been brought up by Jonathan Alper’s blog

“If the debtor has previously depreciated the property for income tax purposes the tax basis of the property has been lowered from its original purchase price. The short sale or deed in lieu may be treated as a “sale or exchange” which triggers income tax on the difference between the property value and the adjusted basis. This tax liability is not eliminated by insolvency or bankruptcy. People considering walking away from investment property should check with their CPA to see if they may incur tax liability by the recapture of prior tax depreciation.”

As the year comes to a close and tax thoughts enter your mind, remember. If you are having trouble making your mortgage payments, the recently signed Mortgage Forgiveness Debt Relief Act of 2007 may provide some relief. Homeowners in distress now have a three-year window to refinance the mortgage on their principal residence without paying any taxes on debt forgiveness that they may receive from their lender.

Previously, when the value of your home declined and your mortgage lender forgave a portion of your loan principal, the IRS would tax that forgiven amount.