The City of Austin Neighborhood Housing Department does home repair loans using federal grant funds.

Follow

Q. (cont.)

Customers receive funds while they are displaced (for 90 days or less) so the repairs can be done to their home. The funds they receive for the temporary living expenses are then included in their loan amount. Once the repairs are made and if certain conditions are met, the loan amount for the repairs and living expenses may be forgiven in full. My question is, should the forgiven loan amount or the funds that were given to the customer while they were displaced be reported on a 1099 form? Is this taxable to the recipient? I tried researching the tax code but I could not find anything specific to this situation.

A.

We spoke with IRS information specialist Mr. Repp (ID #1003080021), who told me that this type of forgiven loan is probably not reportable to the homeowner as it is done through a federally-funded government assistance program to a low-income family. It would therefore fall into the category of a charitable gift. Please let us know if this is not the case.

He referred us to Publication 525, Taxable and Nontaxable Income (https://www.irs.gov/pub/irs-pdf/p525.pdf), and Publication 17, Your Federal Income Tax (https://www.irs.gov/pub/irs-pdf/p17.pdf).

Have more questions? Submit a request

Comments