Cancellation of Debt; St Louis Mortgage Interest Rate Update

As part of the fiscal cliff deal, Congress extended the cancellation of mortgage debt relief provision for 1 year, through the end of 2013.

It seems there is little focus on the importance of this law, it is crucial to foreclosure mitigation efforts such as principal forgiveness and short sales.

Normally, when a lender forgives all or a portion of a borrower’s debt, U.S. law decrees that the forgiven amount is considered taxable income to the borrower.   This “forgiveness” is also known as Cancellation of Debt (COD) Income. COD must be included in a taxpayer’s gross income. The Mortgage Forgiveness Debt Relief Act allows homeowners who received principal reductions or other forms of debt forgiveness not to pay taxes on the amount forgiven.

Consult your tax adviser to determine whether the Mortgage Forgiveness Debt Relief Act is relevant to your particular situation.

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