Tax Extensions and Your Mortgage
July 6, 2015
At the time of this writing, the 2015 tax deadline of April 15th has come and gone. There are plenty of people who made the midnight deadline to file their federal taxes for the previous year, but others needed to apply for extensions to the deadline which the IRS allows for those who need to file taxes later in the year.
Are you one of those who have requested an extension and plan to complete your taxes for 2014 at a later time? Perhaps you have not needed an extension this year but might need one in the future--if either one of these scenarios could apply to you, read on. There is some very helpful information about home loan debt and related issues that may affect those who have FHA home loans or have applied for and been approved for FHA refinance loans.
One important issue many borrowers have had to face in recent years is the tax consequences from a home loan modification or similar alteration to a mortgage where part of the debt is forgiven, cancelled, or written off by the lender.
This article is not tax advice and should not be construed as such--we are simply quoting what’s printed on the IRS official site. If you have tax questions, please consult a tax preparer or tax expert who can help advise you in your specific circumstances.
The IRS official site says, “If your lender cancels part or all of your debt, you normally must pay tax on that amount. However, the law provides for an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2014. In most cases where the exclusion applies, the amount of the cancelled debt is not taxable.”
Furthermore,“If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.”
Have you applied for a home loan modification? The IRS reminds borrowers, “you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.”
What about borrowers who had a certain amount of their debt cancelled when refinancing a mortgage loan? “The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. Amounts used for other purposes don’t qualify.”
These rules are subject to change from year to year--federal tax laws can and do change, home loan modification programs may come and go, or they may change with the times. Speak to a tax expert about these issues, or contact the IRS directly at the local office nearest you. You can also learn more at the IRS official site.
Are you one of those who have requested an extension and plan to complete your taxes for 2014 at a later time? Perhaps you have not needed an extension this year but might need one in the future--if either one of these scenarios could apply to you, read on. There is some very helpful information about home loan debt and related issues that may affect those who have FHA home loans or have applied for and been approved for FHA refinance loans.
One important issue many borrowers have had to face in recent years is the tax consequences from a home loan modification or similar alteration to a mortgage where part of the debt is forgiven, cancelled, or written off by the lender.
This article is not tax advice and should not be construed as such--we are simply quoting what’s printed on the IRS official site. If you have tax questions, please consult a tax preparer or tax expert who can help advise you in your specific circumstances.
The IRS official site says, “If your lender cancels part or all of your debt, you normally must pay tax on that amount. However, the law provides for an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2014. In most cases where the exclusion applies, the amount of the cancelled debt is not taxable.”
Furthermore,“If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.”
Have you applied for a home loan modification? The IRS reminds borrowers, “you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.”
What about borrowers who had a certain amount of their debt cancelled when refinancing a mortgage loan? “The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. Amounts used for other purposes don’t qualify.”
These rules are subject to change from year to year--federal tax laws can and do change, home loan modification programs may come and go, or they may change with the times. Speak to a tax expert about these issues, or contact the IRS directly at the local office nearest you. You can also learn more at the IRS official site.
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