According to a couple of articles I read in the Sunday papers this morning, the IRS has released additional guidance for homeowners that have negotiated a loan modification or short sale and need to understand how to deal with their canceled mortgage debt.

Here’s a breakdown of the key points in their latest guidance:

• First and foremost, the debt canceled by your lender must have been used by you to “to buy, build or substantially improve your main principal residence.”
• Second, you cannot deduct forgiveness on debt for second homes, investment properties, or seasonal properties you occupy for less than 6 months a year.
• Third, refinanced debt that was used for non-qualifying purposes – tuition, a new car, paying off credit card debt, etc., does not qualify.

Continue Reading IRS Guidance for Forgiven Mortgage Debt

Tags: foreclosures, IRS, mortgages, taxes

The Internal Revenue Service (IRS) has finally announced two important clarifications regarding the documentation required for taxpayers seeking to claim the first-time and move-up homebuyer tax credits. Local guidelines, especially for closing statements have caused a lot of confusion for both claimants and their tax preparers.

The IRS announcement said that while they still are requiring the filing of Form 5405, they are no longer demanding that all parties’ signatures be on the HUD-1 settlement statement in areas where the buyer and the seller signatures are not common practice. However, they are encouraging all buyers to sign the settlement statement prior to attaching it to the tax return.

Continue Reading Two Important IRS Clarifications for Claiming the Tax Credit

Tags: buyers, IRS, taxes

One of the lesser talked about parts of the new housing bill is homeowners who do not itemize on their tax returns will now get the opportunity to get some credit on their 2008 federal tax return for their property taxes. Under the new guidelines, homeowners who take the standard deduction ($10,900 for married couples and $5,450 for singles) will get an additional standard deduction of $500 for single filers and $1,000 for married couples who file jointly.

It is estimated that about 40% of homeowners don’t itemize including many in less expensive homes, those with small outstanding balances owed on their homes and folks age 65 and older. They all will now be able to get an extra new tax break in addition to this year’s larger standard deduction.

Continue Reading Property Tax Break Broadened

Tags: IRS, new laws, taxes

On Monday, the IRS announced it is raising the automobile mileage rate that self employed individuals and business owners can claim on their tax returns. The agency said the standard rate it allows to calculate deductible operating costs for business vehicles will go up to 58.5 cents from the current 50.5 cents and will be available for use for the last six months of 2008.

Citing rising gas prices as having a major impact on individual and business finances, IRS Commissioner Doug Shulman said “given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile. He also said the agency wanted to get the new guidance early out so that businesses could prepare for doing mid-year adjustments beginning July 1st.

Continue Reading IRS Ups Automobile Mileage Writeoff

Tags: IRS, taxes