Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007. 

Normally if you do a short sale, or if you foreclose on a home, you would receive a 1099 for the amount of debt you have not had to repay. Then you would be required to pay the taxes on the amount as income to you.

The Mortgage Forgiveness Debt Relief Act of 2007 made it so many people having financial challenges from 2007 till 2009 who sell their home in a short sale situation or have their home foreclosed upon will not have to have the burden of being taxed on the amounts of the debt.

The catch is, not everyone is exempt from getting the 1099.

If the home was a second home or an investment property, you will still receive the 1099 and have to pay taxes on the debt.  If you refinanced, pulled money out of your home, and it was used for anything other than adding to the value of your home, you will be gettting a 1099 and paying the taxes.

Check out the IRS information on this Act as you consider your options.