Mortgage Forgiveness Debt Relief Act

The Mortgage Forgiveness Debt Relief Act is a U.S. law that helps homeowners who have had mortgage debt forgiven or reduced during financial hardship, such as foreclosure or loan modification. Normally, canceled debt is considered taxable income, which can create a hefty tax bill for the borrower. However, this Act allows eligible homeowners to exclude that forgiven debt from their taxable income, easing their financial burden. The Act has been extended several times but may not always be in effect, so it's important for homeowners to check their current tax obligations if facing mortgage challenges.