The QPRI exclusion allows a taxpayer to exclude up to $2 million of the forgiven debt related to a decline in the value of the residence or to the financial condition of the taxpayer.

What is the maximum amount of qualified principal residence debt cancellation that they can exclude from their income?

$1 million
That’s because the IRS Code generally treats discharged debt as taxable income. But the QPRI exclusion allows some borrowers to exclude up to $1 million (up to $2 million for married couples) of forgiven debt from their taxable income.

What is qualified principal residence debt?

Any debt secured by the principal residence resulting from the refinancing of debt incurred to acquire, construct, or substantially improve a principal residence, but only to the extent that the amount does not exceed the amount of the refinanced indebtedness. …

What is qualified principal residence indebtedness QPRI exclusion?

What Is the Qualified Principal Residence Indebtedness (QPRI) Exclusion? If a mortgage lender forgives all or part of a borrower’s debt as part of a loan modification or after a foreclosure, short sale, or deed in lieu of foreclosure, the I.R.S. generally includes the amount in the borrower’s gross income.

What is Form 982 Reduction of Tax Attributes?

Form 982 is used to determine, under certain circumstances described in section 108, the amount of discharged indebtedness that can be excluded from gross income.

What are the rules for mortgage debt forgiveness?

Under the act, taxpayers were able to exclude up to $2 million in debt forgiveness, whether through foreclosure, short sale, or some sort of mortgage modification. The key stipulation: The waiver had to be made on the taxpayer’s qualified principal residence. Second homes and vacation homes did not qualify. All good, right?

When do I get my mortgage principal forgiven form?

In late January or early February 2020, a homeowner whose mortgage principal was forgiven in part or in full in 2019 might receive a 1099 form that is also reported to the IRS.

When does forgiveness of forgiven debt become retroactive?

The extension applies to debt discharged before January 1, 2021 and is retroactive to forgiven debt since the beginning of 2018. (Existing law already protects discharges prior to January 1, 2018.)

Do you have to report forgiven principal on taxes?

If the QPRI exclusion applies, the homeowner does not have to report this forgiven principal as taxable income on their tax returns. The exclusion only applies to the consumer’s main home.