What is principal reduction? – Is principal reduction taxable income?

So, what is principal reduction? This concept is rapidly spreading as the housing markets heat up! Principal reduction is a popular technique for homeowners that want to pay off their mortgage quicker or want a lower monthly payment.

Sometimes, governments will hand out principal reductions to citizens that qualify. Typically, a principal reduction is when the principal amount on a loan is reduced significantly. When a home is worth less than what it was bought for, this can prompt the state government to produce principal reduction pleas and amounts.

Sadly, a principal reduction is considered taxable income. When filling out taxes, this is information relevant to the tax agencies. Usually, though, countries like the U.S are the first to pass principal reductions for qualifying citizens. The harsh part is that the amount is taxable, which can lead to overpaying.

The good thing about reducing the principal amount of a loan is that the monthly payments also decrease! Looking for ways to save money? Round up on your next few repayments and watch as the minimum monthly repayment amount decreases.

Principal Reduction is Taxable Income Conclusion

Overall, a principal reduction that is given by the state or federal government is taxable income. Although you do need to report all income that you have made, it is not necessary to report repaying more than the minimum amount as taxable. Mortgage House lenders are leading experts in the non-bank lending industry in Australia, and they are waiting to discuss more principal reductions and taxable income!