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How does a loan modification affect my taxes?!

Discussion in 'Loan Modification' started by g5lisa, Mar 17, 2010.

  1. g5lisa

    g5lisa LoanSafe Member

    I got a loan modification last May. The lender set aside $92k. I went from 10.5% to 6% interest and lost over $18k in interest payments. My question is, in the past I paid around $18k a year (interest only loan), last year, my lender reported I only paid $4k. In the money they set aside, this must have included interest payments I made, correct? l I missed maybe 2 payments last year due to the timing of the mod, but now, I have to pay $3k to IRS. This is a harsh reality. Thanks for any help. Has anyone else experienced this?
  2. Moe

    Moe Call 1-800-779-4547 Staff Member Loan Safe Mortgage

    This is actually news to me, but it seems like this is what they would do. Maybe someone else has had this experience?
  3. lisasxr

    lisasxr LoanSafe Member

    Your mortgage interest is a deduction - used to lower your taxable income. If you had previously adjusted your estimated payments or payroll withholdings to maximize cash in your pocket and usually break even when filing your return, then the lower interst paid would not lower your income to the extent your used to - thus causing taxable liability to the IRS.

    You should be able to obtain a transaction history for your account showing just how much of each payment is going against principle/interest/escrow. Prepare NOW for the 2010 tax year and change your withholdings / estimated payments if you need to.
  4. Citified

    Citified LoanSafe Member

    I am concerned about this as well, as I am used to a refund every year. My refunds also have grown since paying a large amount of interest on the house, but with my modification, I will be paying considerably less in interest than I used to. I am sure inevitably this will affect my 2010 taxes.
  5. lisasxr

    lisasxr LoanSafe Member

    The IRS website has a withholding calculator you can use. You will enter in the income you receive along with any deductions/credits you believe eligible. It will then tell you how to set the withholdings via a W4 form to your employer.
  6. gz9gjg

    gz9gjg LoanSafe Member

    I prefer to do those calculations at a non-IRS website . . . I use PayCheckCity.com and it does a great job of calculating my net take-home pay after deductions. I use it whenever I am doing a W-4, have an income change, or am considering changing my 401-K deduction.

    Good luck . . .
  7. lisasxr

    lisasxr LoanSafe Member

    BUT, that only tells you what your net income will be after the changes -- The irs website is used so you can attempt a NET ZERO tax liability. OP's original text was in regards to is taxable liability.

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