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Tips on Avoiding Debt Forgiveness Tax on Chicago Real Estate

July 16, 2011

Calculator with tax rateNo one enjoys paying taxes, and homeowners of Chicago real estate are no exception. If you’re facing financial trouble and the prospect of foreclosure is looming, one option you may want to consider is debt forgiveness. Like any option, this choice comes with its share of pros and cons. While a foreclosure on your mortgage may not require a payment to the government, it may come with heavy taxes on the forgiven debt. A recent post on the

Equifax Personal Finance Blog deals with debt forgiveness and is a valuable resource for any homeowner facing foreclosure.

In “

How to Avoid Getting Taxed for Phantom Income and Debt Forgiveness,” tax expert Eva Rosenberg explains that cancelled debt is usually taxed as ordinary income. However, her article examines some ways that homeowners can avoid paying those taxes. One such method is protection from the Mortgage Forgiveness Debt Relief Act of 2007. This legislation allows homeowners to avoid taxes on mortgages forgiven between 2007 and 2012. To qualify, the forgiven loan must be the original mortgage and not a refinanced or consolidated loan.

Rosenberg’s article also provides a link to the IRS website that explains the Mortgage Forgiveness Debt Relief Act in detail. For homeowners seeking to modify a loan that is taxed, she offers alternatives like proving insolvency.

To read the full article and learn all of Rosenberg’s strategies for avoiding taxes on forgiven debt, visit the

Equifax Personal Finance Blog.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

1 Comments

1

Thanks for the tips on how to avoid the debt forgiveness tax. It seems like this choice should not be taken lightly.

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