When you have a canceled debt, you may think you’re done with that old nuisance. Unfortunately, the IRS sees it otherwise. Technically, since you owed money beforehand and now you don’t, your financial situation is increased by the amount of canceled debt. When you have an increase to your financial situation, this is known as income. And income, as you know, is quite often taxable – but sometimes there are ways to exclude the canceled debt from your income for tax purposes. The IRS recently issued a Tax Tip (Tax Tip 2016-30) which details some important information that you need to know about canceled debt, including HAMP modifications and other items. The actual text of the Tip follows: Top 10 Tax Tips about Debt Cancellation If your lender cancels part or all of your debt, it is usually considered income and you normally must pay tax on that amount. However, […]
mortgage debt
Should You Pay Off Your Mortgage Early?
As individuals pursue the American Dream of buying their first or next home the question may arise on whether or not it’s a good idea to pay down the mortgage and have no mortgage debt or pay the normal monthly payment and invest the extra money that would have gone to pay down the mortgage early in a place (the stock market) that offers the potential for higher returns over the long run. There are many fierce advocates for paying off debt, any debt early. While this is a wise choice regarding high interest debts such as credit cards, student loans and other high interest loans it may not necessarily be the case for home mortgage debt. Here’s a situation where for some folks it may make sense to pay down early and for others they may wish to consider invested the extra money elsewhere. Generally, the younger a person […]
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7 Debunked Myths About Mortgages
Guest post by Diana Fishlock for Zillow.com. Diana Fishlock has researched and written articles on a wide variety of subjects for newspapers in New York, Pennsylvania and Maryland. She lives near Harrisburg, PA and writes for Zillow. Securing a mortgage can be a daunting, confusing process for first-time home buyers as well as experienced homeowners considering moving or buying a second home. There are lots of myths and misconceptions about mortgages, such as who qualifies and what makes a good one. Myth 1: Prequalified means preapproved. Reality: Prequalifying for a mortgage and being preapproved are two different steps. Prequalifying is a lot simpler. It requires informing a lender about debts, income and assets in a general sense. Prequalifying helps buyers loosely determine their affordable price ranges. For preapproval, a buyer must submit to the lender much more detailed information, including a financial history. The lender then verifies the borrower’s debt-to-income […]
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Why You Need an Emergency Fund
You may or may not have heard that it’s wise to have an emergency fund. Even if you’ve heard it, you may not be aware of what it means and why you should have one – and more importantly why you need one. An emergency fund is just that. It’s money set aside for a rainy day, an unexpected bump in the road, or for a real emergency or an expense that you haven’t specifically planned for. Examples of those unexpected expenses (borderline redundant – I know) include a car accident, disability, storm damage to your home, losing a job, being a victim of theft, etc. So what makes up an emergency fund? Generally, a good place to start is to have a goal of at least 3 to 6 months of non-discretionary living expenses put away in a relatively liquid account such as a savings, checking or money market […]
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Mortgage Debt Forgiveness and Taxes
Image via Wikipedia When you have a debt canceled, the IRS considers the canceled debt to be be income for you, taxable just like a paycheck. There are cases where you don’t have to include all of it though, and mortgage debt forgiven between 2007 and 2012 may be partly excepted from being included as income. The IRS recently issued their Tax Tip 2012-39, which lists 10 Key Points regarding mortgage debt forgiveness. Below is the actual text of the Tip. Mortgage Debt Forgiveness: 10 Key Points Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012. The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness: 1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act […]
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