Second Homes Do Not Qualify For Mortgage Forgiveness Debt Relief

An AMG reader asks (there was no e-mail since it came from the Plugoo application):

If debt is forgiven on a second home under construction, but never occupied does it qualify for the forgiveness of debt? Homeowner purchased second home - was going to move into it upon completion.

Second homes do not qualify for the mortgage forgiveness tax benefit President Bush signed late last year. Only primary residences under $2 million qualify. IRS section 121 defines what constitutes a principle residence. This forgiveness provision is not forever either, its only for mortgage debt forgiven in 2007, 2008 and 2009.

As anything with the tax code, the whole thing is pretty complex so consult a tax professional for the details. In the mean time Ilyce Glink’s blog has a great “Tax Help” section which discusses this very issue.

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