In the past people who had their homes foreclosed on had to pay income tax on the amount that the Mortgage Company Forgave. What is this, well, if your home went to foreclosure and you owed the mortgage company $200,000 but the house only sold on auction at $150,000. If the mortgage company wasn't successful in getting the balance of $50,000 out of you they would write it off. Then at the end of the tax year you would get a 1098 form for $50,000 that they forgave/wrote off. For this year at least that amount will not be taxable according to the IRS. You report it on your tax return but it will be a none taxable item. In past years you were taxed on the additional $50,000.

Linda
UR Tax lady