Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s most recent settlement 

Posted by Aug25, 2014 Comments Comments Off on Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s most recent settlement 

The Department of Justice just announced a $17 billion settlement last week with Bank of America.  The settlement is supposed to provide mortgage debt relief for troubled homeowners, but those who accept that help could be hit with a hefty tax bill later. According to the Attorney General’s office, here’s an example of how the settlement would work for a homeowner who owes $250,000 on a house that’s only worth $150,000.  Under the settlement, the balance of the mortgage would be reduced to about $112,000.  However, the roughly $137,000 forgiven under the deal could be a huge tax liability for the homeowner.  Although the settlement is supposed to help offset this, it is not enough.  Most homeowners won’t even realize it until its too late to do anything about it, and they will then have to deal with the IRS.   (Forgiven debt is straight income per the IRS.) If you have a mortgage with Bank of America, or know someone who does, please have them speak to a bankruptcy attorney before they accept any offers from the settlement.  Timing is critical to avoid the tax consequences.  Please spread the word.

Here’s the full article:  http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/21/some-homeowners-could-get-hit-with-a-whopping-tax-bill-if-they-accept-help-through-bank-of-americas-settlement%E2%80%82/

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