A new law allows homeowners whose mortgage debt was partly or entirely forgiven during 2007 to claim special tax relief.
The Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, allows eligible homeowners to fill out newly revised Form 982 and attach it to their 2007 federal income tax return.
Normally, debt forgiveness would result in taxable income. But under the new law, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million (for a married couple filing jointly).
Details and instructions about Form 982 are available at www.IRS.gov.