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
Reverse Mortgages Require a Close Look
For many folks in their retirement years, home equity can be a substantial part of your overall net worth. According to recent figures, the equity in your home can amount to roughly 30-40 percent of your net worth, if you’re in the majority. If you and your spouse are both at least 62 years of age and have significant equity in your home, a reverse mortgage can turn that equity into tax-free cash without forcing you to move or make a monthly payment. If it’s right for you, a reverse mortgage can be a worthwhile financial tool. If not, you could cause some serious problems for your financial future. A reverse mortgage gets its name because of the way it works. Instead of the borrower making payments to the lender, the lender releases equity to the borrower in a number of forms: A lump sum cash payment; A monthly cash payment, like a […]
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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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Year End Income Tax Planning
Image via Wikipedia Once you’ve reached the last month of the tax year, there aren’t a lot of things that can be done to minimize your income taxes. But there are a few things that could be done. For example, you could double up your real estate taxes by prepaying next year’s tax during December. Doing this with, for example, a $3,000 per year real estate tax bill could result in a reduction of tax for the year of $750 if you’re in the 25% bracket. Keep in mind though, that you’ll have forked out this money long before it is actually due in most cases, and for the next year you won’t have this deduction available if you used it in this year. The same could be done with your charitable contributions – there’s no reason that you can’t make additional contributions to your favorite charities at the end […]
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