If you try refinancing your home loan in 2013, you may end up having to pay taxes if your lender forgives some of the loan amount.
In 2007, the government implemented a tax code that allows taxpayers to exclude the amount of debt that has been forgiven by their lender from their personal income statement. The code was intended to give struggling homeowners a chance to hold onto their homes and avoid further financial trauma from the refinancing, short sales or foreclosure process.
Under the tax code, borrowed money is not required to be disclosed as income to the IRS since you had an obligation to repay it. However, in 2013, if your lender cancels the amount you owe you will be required to report it since your repayment isn’t required
For example, if you owe $250,000 on your mortgage, but your lender forgives $50,000 after refinancing, you will have to pay taxes on the difference depending on your own personal situation and the area you live in.
Getting your personal finances under control is the first step to qualifying for a home loan. Freedom Mortgage offers some of the latest advice on comprehending a fluid housing market from improving your home value to tips on comparing mortgage loan rates.
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