The "Get Out Of Your Car!" Fund

Thursday, March 31, 2016

No mortgage loan forgiveness tax debt

It's a new day!

I did my taxes yesterday. Here's how I thought it would go.

Me: Here's all my paperwork, nicely organized like I've learned to do over the years since I've been managing money more intentionally.

Tax Pro: This is great. You are so organized and technologically astute. Thanks for sending me all needed documents electronically and making your appointment with me online.

Me; No problem.

Tax Pro: Well, there is a small problem. You competed that short sale you've been working on for 2 years. Congrats. You now owe $20,000 in taxes because of the forgiven debt. You can contact the government to setup a payment plan. Hopefully that can be paid off in 3 years

Me: Yeah...(I wonder what life will be like in the Mitsubishi compared to the Honda?)

Well, it did not go that way. It went more like this.

Me: Here's all my paperwork.

Tax Pro: Great. Let's get to it.  You competed that short sale you've been workingon for 2 years. Congrats. Because Congress extended it's mortgage forgiveness program, you don't owe any taxes the forgiven debt.

Me: (silence as I pick my jaw up off the floor).

Tax Pro: So, you're going to work on rebuilding your finances so you can purchase again in the future?

Me: Yes. (but go back to faithful tithing first without the worry).

I feel like I have a new leash on life. Getting my taxes done completely ends my uncertainty about what debts I owe and how much. I am down to 3 debts: a student loan, a line of credit, and the payment that I owe the HOA. With the debts, house renovations, and unexpected major expenses, like the new car, that amounts to $51K paid on debts or would-be debts in 36 months. (average is 1416/month).

I have left 61K which is what I put on the front page of my blog now and I reset the thermometer to measure me paying down that debt as of today, March 30, 2016.

My parents' house is almost complete. It needs paint, carpet, and appliances, and a few furniture pieces (2 beds, a couch, and a table to eat on), All of those are relatively small amounts compared to what has been put into the property (except appliances, which parents can help pay for, they said).

I have already told my school that I plan to return next year and the principal was very happy to hear me say that. So, I feel job security.

I feel so free.

It's spring break now and I have a lot of free time. I'm going to redo my budget today for April as well as look at paying down the PNC debt, increasing my income, and planning on getting a new apartment in August.

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