FHA help for homeowners program, do the homeowners have to pay tax on the amount that is forgiven?
With this loan modification program, Help 4 Homeowners, by FHA, will the homeowner have to pay a tax on the amount of the home loan that if modified, or forgiven, by the original lender? Will there be a balloon tax for that amount?
- Anonymous1 decade agoBest Answer
See IRS publication 4681. Example 1 on page 10.
Generally the loan modifcation amount can be excluded from income (if it's the original loan), BUT the amount is subtracted from your basis. If the value of the house ever recovers and you sell, that amount is subject to ordinary income taxes. It can not be excluded under any IRS code.
- kunjaldpLv 41 decade ago
If the debt is forgiven, then it is taxable as ordinary income, but I believe there is a law in making that would make it non-taxable as long as it was on your home which is about to be foreclosed.