There is tax relief for struggling home owners

There is tax relief for struggling homeowners. For homeowners where their mortgage was forgiven , there are some tax benefits:

1. Debt forgiveness is usually considered taxable income. However, you may qualify to exclude up to $2 million of debt forgiveness on your primary residence.

2. The mortgage forgiveness that may be qualified for income exclusion has to be used to buy, build or substantially improve your primary residence. Refinancing may also qualify.

3. You should receive Form 1009-C if your mortgage was forgiven. Keep this form when preparing your taxes. If you qualify for the income exclusion, you must also complete Form 982 Reductoin of Tax Attributes Due to Discharge of Indebtedness. This form must be attached to your Federal Income Tax Return.

source: http://www.irs.gov/newsroom/article/0,,id=184704,00.html