Passing the test on canceled mortgage debt has tax rewards
Homeowners who went through loan modifications, short sales and foreclosures can avoid big tax bills if they qualify for a special exemption adopted by Congress.
Â Anyone who has had mortgage debt canceled as part of a loan modification or foreclosure should go to IRS.gov and download Form 982 and IRS Publication 4681 for additional filing details. Or call (800) TAX-FORM
Lenders who write off unpaid mortgage balances typically provide borrowers with a year-end IRS form 1099-C cancellation of debt statement, including the amount of the loan forgiven and the fair market value of the property.