The Mortgage Debt Relief Act of 2007 Q&A
Josh Talayka | April 20, 2009
If you have a debt canceled or forgiven, that amount may be taxable as income.
The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude this amount as income if the discharge of debt was on their principal residence. This included debt reduced through mortgage restructuring, short sale, or mortgage debt forgiven in connection with a foreclosure.
The provision applies to debt forgiven between 2007 and 2012, on amounts up to $2 Million ($1 Million if married filing separately.