Tax help for home-foreclosure victims

The nation is undergoing a wave of record home foreclosures. While the Asheville area is fairing better than many areas of the country, the problem remains all too real for many in the area. Unfortunately for foreclosure victims, the loss of a home is only one problem. In many cases, foreclosure means a potentially severe federal-tax liability. So it’s important to know what penalties apply — and what forms of relief are available.

In a bid to help, the Internal Revenue Service has unveiled a special new section on its Web site for people who have lost their homes due to foreclosure. The IRS also reassures homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.

The new section of IRS.gov includes a variety of information, including a worksheet designed to help borrowers determine whether any of the foreclosure-related relief provisions apply to them. For those taxpayers who find they owe additional tax, it also includes a form they can use to request a payment agreement with the IRS. In some cases, eligible taxpayers may qualify to settle their tax debt for less than the full amount due using an offer-in-compromise.

Under the tax law, if the debt wiped out through foreclosure exceeds the value of the property, the difference is normally taxable income. But a special rule allows insolvent borrowers to offset that income to the extent their liabilities exceed their assets.

— Hal L. Millard, staff writer

SHARE

Thanks for reading through to the end…

We share your inclination to get the whole story. For the past 25 years, Xpress has been committed to in-depth, balanced reporting about the greater Asheville area. We want everyone to have access to our stories. That’s a big part of why we've never charged for the paper or put up a paywall.

We’re pretty sure that you know journalism faces big challenges these days. Advertising no longer pays the whole cost. Media outlets around the country are asking their readers to chip in. Xpress needs help, too. We hope you’ll consider signing up to be a member of Xpress. For as little as $5 a month — the cost of a craft beer or kombucha — you can help keep local journalism strong. It only takes a moment.

Before you comment

The comments section is here to provide a platform for civil dialogue on the issues we face together as a local community. Xpress is committed to offering this platform for all voices, but when the tone of the discussion gets nasty or strays off topic, we believe many people choose not to participate. Xpress editors are determined to moderate comments to ensure a constructive interchange is maintained. All comments judged not to be in keeping with the spirit of civil discourse will be removed and repeat violators will be banned. See here for our terms of service. Thank you for being part of this effort to promote respectful discussion.

5 thoughts on “Tax help for home-foreclosure victims

  1. Sarah Brown

    To help prevent foreclosure, OnTrack Financial Education & Counseling (formerly CCCS), WNC’s trusted non-profit source for financial education and counseling, offers free one-on-one Foreclosure Prevention counseling sessions. OnTrack also offers a loan program for applicants who are at risk of losing their home or becoming late on payments because of an employment lay-off or loss of income due to changing local economic conditions. Call 828.255.5166 or 1.800.737.5485 for more information.

  2. dave

    Tim,

    So, in other words, the “housing boom” was by-and- large, artificially created to extend a spending boom. Although the dollar has been in trouble since early 2001, and hit even more troubles after Sept. the 11th of that year, the stock market, and vicariously, our entire economy, was propped up by a manufactured ‘housing boom’ that kept people spending on homes, home-repair projects, and all the offshoots of these industries.

    Now that this has finally ‘burst’, we are beginning to see the train light at the end of the tunnel, as our economy and the dollar drop to new lows.

    Am I getting this right?

  3. “Am I getting this right?”

    Yes. Pretty much. A housing bust is inevitable because the artificial credit expansion stimulates a boom of “malinvestments” whose payments come due during the downturn.

  4. travelah

    Let them eat cake … what in hell is wrong with people? If somebody takes out an ARM and their interest rate goes up, PLEASE, somebody explain to me why that is a cost to be carried by my tax wallet??? Will I get a check in the mail when rates go down????

Leave a Reply

To leave a reply you may Login with your Mountain Xpress account, connect socially or enter your name and e-mail. Your e-mail address will not be published. All fields are required.