[acearl3759]

mortgage tax deductible? If I get a principal reduction on my rental home through my mortgage provider, do I have to pay taxes on the forgiven principal? I have a townhouse with about $330K in mortgages that's only worth around $150K now.Everyone is addressing "qualified principal residence indebtedness" when answering this question and saying that it doesn't qualify for that. I understand that.However, does this count as "qualified real property business indebtedness"? This is another line item on the same form that you use to claim "qualified principal residence indebtedness" and basically has the same effect of not counting the forgiven balance towards income.I'm reading IRS Forms 982 and Publication 4681 and am still not sure if I qualify, although it seems like maybe?