TAX RELIEF: FORM 982 MAY REDUCE YOUR TAXES.

If you received a form 1099-C (Cancellation of Debt) for a loan modification, foreclosure, or short sale of your primary residence, you maybe able to reduce the amount of income to be included in your income tax return from form 1099-C.  Form 982 is used to show reduction of the amount of debt included as income from several sources but I am only going to discuss the part that pertains to a primary residence. 

In order to use form 982 for your primary residence you must have Qualified Principal Residence Indebtedness.  This is a mortage that you took out ot buy, build, or substantially improve your main home.  Also the debt is secured by your main home.  If the amount of the orginal mortgage is more than the cost of your main home plus improvements, only the debt that is not more the cost of your main home plus improvements is qualified principal residence indebtedness. 

The amount of exclusion applies only to debt discharged after 2006 and before 2013.  The maximum amount you can treat as qualified principal residence indebtedness is $2million ($1million for married filing separately).

If only part of the loan is qualified principal residence indebtedness, the exclusion applies only to the extent the amount discharged exceeds the amount on the loan (immediately before the discharge) that is not qualified principal residence indebtedness.  For example, your main home cost $1million, of which $800,000 is qualified principal residence indebtedness.  If your home is sold for $700,000 and $300,000 of the debt is discharged, only $100,000 of the debt discharged can be excluded.  The other $200,000 is nonqualified debt, it may however qualify under one of the other exclusions.

Comments

  1. TaxseerNovember 1, 2019 at 11:52 PM

    Thanks again for all the great information…I am grateful! 1099 C Form Online. You can clearly explain about it.

    ReplyDelete

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