How does a loan modification effect your income during tax time? Does the company write off the loss?

John D asked:


When a company writes of part of a debt, it is then recorded as income to the IRS and you pay taxes on it. Does the loan modifcation work the same way?

Judy

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Tags: Income Tax, Tax Time, Taxes

This entry was posted on Sunday, December 14th, 2008 at 1:54 pm and is filed under Loan Modification. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

3 Responses to “How does a loan modification effect your income during tax time? Does the company write off the loss?”

1. v b Says:
   December 17th, 2008 at 2:30 pm

   See IRS publication 4681. You will get a 1099-C if the loan modification writes off any part of your loan balance.

   Depending on when the modification occurs, you may be able to postpone including the money as income on form 982. (If the house ever recovers in value, you would have to include the money as income in the year you sell.)

2. Landlord Says:
   December 19th, 2008 at 3:04 am

   The money in your hands you had the money in your hands you will have to pay federal and state income tax you had the money in your hands.
   The money in your hands you had the money in your hands you have not.
   The money in your hands you have not paid taxes on it yet.

3. Ed Atun Says:
   December 22nd, 2008 at 9:15 am

   The end of debt on your personal residence same for modifications.
   The tax was your form 1040 if it was eliminated thru the end of debt on your form 1040 if it was your.