If you have been through process you’re probably just wanting to breath a little. The exhausting phone calls, the endless amounts of paperwork have more than likely taken the wind out of your sail. But what happens next.

You will recieve a 1099 in the mail at the end of the year that will represent the  amount of the debt forgiven. The amount of Debt Forgiveness is sent to the tax payer and the IRS via 1099. This is considered income and can drastically affect the amount of your IRS debt.

There is some relief from the government that will prove helpful to millions of people facing this situation. The Mortgage Forgiveness Debt Relief Act of 2007 was signed into law on December 20, 2007. This law protects taxpayers who have lost or will lose their primary residence through short sale or foreclosure during the period of January 1, 2007 through December 31, 2009.

Current tax codes treat this debt forgiveness from a lender as income taxed at ordinary income tax rates.  Taxpayers with loan balance are less than 2,000,000.00 for Married Joint filers and 1,000,000.00 for a married person filing a separate return max exclude this forgiven debt if it the property was the primary residence.

Investment properties, second homes, credit cards, car loans, or business property DO NOT qualify.

AS always consult your tax professional. Its always good to know where you stand.