Mortgage Debt Relief Act – Extended One More Year

Ordinarily any housing debt forgiven by a lender or servicer (short sale, principal reduction, short refinances, deed-in-lieu of foreclosure, etc.) is considered taxable income by the I.R.S. and must be included (added) to a taxpayer’s gross income when calculating their income tax.

In 2007, the Mortgage Forgiveness Debt Relief Act allowed homeowners who received debt forgiveness to not have to pay taxes on the amount forgiven in most circumstances.  The law was then extended in 2009 for an additional three years (through 12/2012).

The ‘fiscal cliff’ deal that was recently signed by President Obama extends the exception for home mortgage debt forgiveness for an additional year covering debts discharged through the end of 2013. 

Minnesota homeowners need to know that there are MANY stipulations in the legislation.  Most importantly, for homeowners to qualify for debt forgiveness, their debt must have been used to “buy, build, or substantially improve” their primary residence.  This stipulation is especially important for buyers whose debt has been forgiven on a refinanced or second mortgage.

You can view a copy of our newly-updated fact sheet here.

Consult a qualified tax professional if you have additional questions about the Mortgage Forgiveness Debt Relief Act or the most recent extension.

Dozens of other helpful facts sheets about foreclosure and foreclosure prevention are available to the public and can be freely downloaded from the Center's website, here.

If you're struggling with mortgage payments... you're not alone.  Thousands of others are also struggling.  More importantly, Minnesota has a statewide network of non-profit organizations that can help YOU put a plan in place to avoid foreclosure.  Last year, more than half of the people who sought out our services were able to avoid foreclosure.  Don't delay, contact us today.

6 Days Left To Pay Your Taxes

2010 Taxes Are Due on April 18th

So… why are we talking about taxes on a HOUSING blog? It’s not just a simple reminder to pay your taxes - it’s a reminder that if you took advantage of the (up to) $7,500 “tax credit” on a home purchased between April 9th 2008 and July 1st 2009, your first repayment of that “tax credit” is due on your 2010 return.

Here’s a link to our original fact sheet (created in 2008, no longer available on our website).

Here’s the important text:

Homeowners will have to pay it back. While these funds have been labeled a tax credit, it's really a 15 year, zero interest loan that must be paid back in equal installments over 15 years, starting in the second year after the home is purchased. If you buy a house this year and claim a $7,500 credit on your 2008 tax return, you'll have to pay an additional $500 a year in taxes for 15 years, starting in 2010.

Time to start paying the piper.

The SECOND tax credit, which was a maximum of $8,000 for first-time buyers who purchased between January 1st, 2009 and April 30th, 2010 (last year’s tax credit) does NOT have to be paid back via your tax returns, unless you:

1. Sell the home within three years of purchase or the home is no longer your primary residence.
2. If you sell within three years, and the amount you make on the sale is less than the tax credit, you only have to repay up to the amount of the gain… not the full amount.
3. If you make MORE on the sale, or the home is no longer your primary residence, then you do owe the entire amount.

Confused? Many people are… so make sure you speak with a qualified tax professional if you have any questions about the Homebuyer Tax Credit(s) or any amounts you may owe.

Even Princes Have To Pay Property Taxes

According to tax records in Carver County, Minnesota's famed musical artist formerly-known-as, and now known again as, PRINCE, is delinquent on his state tax liabilities.

The Associated Press has reported that Prince's company (PRN Music Corp.) owes over $227,000 to local tax agencies, in addition to his personal tax obligations.

PRN Music houses Prince's "Paisley Park Studios" in Chanhassen. County records also list several other properties under his full name, Prince R. Nelson, as delinquent.

According to the AP, the outstanding amount Prince and PRN music owe is about $450,000!

As the Center has highlighted repeatedly... not only can a lien holder (mortgage holder) foreclose on a property... counties can too!  If Prince and/or PRN music don't pay their back property taxes, the county does have "seizure authority" and can seize the properties in order to sell them to recover owed taxes.

While the Center can't help PRN music with their taxes, it is conceivable that one of our Foreclosure Counselors may be able to assist Prince IF the property that he owes taxes on is his primary residence.  There are no income minimums or maximums to receive counseling.  And counselors can offer information and assistance to ANYONE - even Prince - if they are struggling with mortgage payments or property tax payments on their home.

If Prince (or you) would like to speak with a FREE, non-profit Housing Counselor, visit the MN Home Ownership Center's website here.