Income Tax Service For Individuals - Under Secs. 108(a)(1)(E) and (h), discharge-of-indebtedness income from qualified principal residence debt of up to $2 million ($1 million for married taxpayers filing separately) is excluded from gross income. The American Taxpayer Relief Act of 2012 extended this exclusion to qualified principal residence debt discharged before Jan. 1, 2014.
In Rev. Proc. 2013-16,9 the IRS provided guidance for homeowners participating in the Home Affordable Modification Program’s Principal Reduction Alternative (HAMP PRA). To the extent that a borrower under HAMP PRA uses a property as his or her principal residence or the property is occupied by the borrower’s legal dependent, parent, or grandparent without rent being charged or collected, the borrower can exclude from gross income under the general welfare exclusion the PRA payments HAMP makes to the investor in a mortgage loan. But the borrower must include these payments in gross income to the extent the property is used as a rental property or is vacant and available to rent. For no obligation free consultation contact us today!
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