Canceled Debt on Second Home

szie21707 · ‎January 28, 2021

Can you exclude canceled debt on a second home? It was not my primary residence but I let my daughter live there.

ErnieS0 · ‎January 28, 2021

No. You cannot exclude debt on a second home. The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude up to $2 million of income from the discharge of debt on a principal residence. You can only have one main home at any one time. If your daughter lived in the home it was not your principal residence. And she was not the owner.

Learn more at Home Foreclosure and Debt Cancellation.

You may be able to exclude income through bankruptcy or insolvency. To report a bankruptcy or insolvency exclusion, attach Form 982 to your federal income tax return. Learn more at How do I report excludable (non-taxable) canceled debt?

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ErnieS0 · ‎January 28, 2021

No. You cannot exclude debt on a second home. The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude up to $2 million of income from the discharge of debt on a principal residence. You can only have one main home at any one time. If your daughter lived in the home it was not your principal residence. And she was not the owner.

Learn more at Home Foreclosure and Debt Cancellation.

You may be able to exclude income through bankruptcy or insolvency. To report a bankruptcy or insolvency exclusion, attach Form 982 to your federal income tax return. Learn more at How do I report excludable (non-taxable) canceled debt?

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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Canceled Debt on Second Home