CENTRAL OHIO -- As the federal tax deadline approaches, many people have been looking for ways to save money.
A fairly new law has been helping people whose homes went into foreclosure.
NBC 4's Tanya Hutchins reported with the FAST FACTS Tuesday.
If a bank foreclosed on your home during the past two years, there may be help.
The IRS used to consider all cancelled debt as taxable income, but the Mortgage Forgiveness Debt Relief Act Of 2007 changed that.
"A portion of that cancelled debt -- they can actually exempt from taxation and it's a portion of the debt all based on the purchase price of the house," Consumer Credit Counseling Services' Rich Call said.
Call said taxpayers have to fill out Form 982 and do some homework.
He said you will have to do some follow up on the property to see whether the house sold at foreclosure and what it actually sold for.
When you do the calculations on the IRS form, the IRS will ask for the purchase price of the house plus any improvements.
There were exceptions, though.
Taxpayers can't write off debt forgiven on second homes, rental property, business property or credit cards.
"If somebody refinanced and increased their mortgage and had a lot of credit-card debt, that portion of the debt will not be cancelled for tax purposes," Call said.
Look for a Form 1099-C from your lender that explains the amount of debt canceled.
Keep in mind you may not receive the form until the foreclosed home sells.
For additional information, stay with NBC 4 and refresh nbc4i.com -- Where Accuracy Matters.
To submit a story idea or news tip, e-mail stories@nbc4i.com.
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