Principal Residence Foreclosure and Short-Sales
New tax laws were passed to address some of these problems. The Mortgage Forgiveness Debt Relief Act allows you to exclude from income up to $2 million of certain home mortgage debt that has been forgiven. This rule is extended through 2014. It only applies to loans taken out to purchase your primary residence. Home-equity loans used to consolidate bills or buy other items does not qualify for this exclusion.
Other types of Cancelled Debt
Debts cancelled on property that is not your principal residence can still result in taxable income on your tax return. This cancellation of debt income can arise from a foreclosure, or short-sales on any property that is not your principal residence. The bank will usually issue a form 1099-C (cancellation of debt.)
Home Mortgage Interest Deduction Limitation
The mortgage interest deduction is limited to loan amounts up to $1 million on home acquisition loans. The interest on loan amounts above $1,000,000 is not tax deductible. An additional interest deduction is allowed for the interest on up to a $100,000 home equity loan.
The Hybrid Vehicle Tax Credit
The purchase of an Electric driven motor vehicle may be eligible for tax credit of up to $7,500. The date purchased and number of cars sold nationwide will help determine the amount of credit you are eligible for.