Mortgage Debt Forgiveness Excluded from Taxable Income
Homeowners who receive a loan modification or benefit from home debt forgiveness are at risk of tax liability on the money they save. Sometimes a big one.
But on March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA). It includes the a foreclosure defense provision called the Qualified Principal Residence Indebtedness (QPRI) Exclusion, according to this report by the National Consumer Law Center.
Under the QPRI, taxpayers can exclude a maximum of $2 million of the forgiven debt from their taxable income. This provision is temporary and expires on January 1, 2026.
NOTE: This firm does not practice tax law; please see a tax professional for advice about your taxes.