IRS Clarifies Mortgage Settlement Payment Tax Treatment

Law360, New York (December 19, 2013, 6:24 PM ET) -- The Internal Revenue Service on Thursday provided guidance on how to apply the tax laws to settlement payments some homeowners have received as part of a $1.5 billion deal to resolve claims over questionable foreclosure practices by the five major mortgage servicers in the U.S.

In a revenue ruling, the IRS explained how qualified homeowners should apply the settlement payments to their taxes. The settlement fund began issuing payments to borrowers who qualified for foreclosure relief over the summer.

As a part of a larger $25...
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