There are advises from some people that if are unable to pay for your mortgage and if you house is underwater (meaning you owe more than what your house is worth right now) you should just mail in the keys to your house and just walk away. But as being seen by many people, who should know better, the write-off amount of your loan is considered as an income by the IRS and you are in the hook for the taxes on that income.
A news on a website reflects on this confusion (which should not be if you do your homework and use common sense). People who thought that they can just walk away from the mortgage obligations are coming in for a surprise when they file their taxes that they have to pay for the amount of write off that the bank does if they don’t pay their mortgage . Many people are very surprised and worried about it but if you use reason and logic, there should have been no surprises. The people who are advising homeowners to just walk away from the house should also do a better job of telling them what their tax liability should be in case they do heed the advise. That is why I keep on telling people on this blog that financial knowledge and education is very important if you don’t want to get surprised on taxes and other financial matters.