California took a bold step today in helping those homeowners in default by allowing taxes owed to the state to be forgiven through 2012.
As mentioned in my blog a few days ago and now the Governor says he will sign the bill as reported by the Sacramento Bee.
“Primarily, the bill affects people who had debt forgiven as they lost homes in foreclosures, short sales and deeds in lieu of foreclosure last year – and through 2012 now. Also affected: those who got loan modifications that cut the amount they owe the bank.”
Read more: http://www.sacbee.com/2010/04/09/2666095/california-wont-tax-forgiven-home.html#ixzz0kdhKy8yh
Even though you may have already submitted your taxes for 2009 you may be able to save even more on your California state taxes if you received a 1099 as a result of a Short Sale.
Yet another positive effort by California legislators to help the housing market with this new bill. The Sacramento Bee reports on this effort to get this bill into law before April 15th deadline.
“The bill being considered this week, Senate Bill 401, would cancel state tax obligations for forgiven mortgage debt through the 2012 tax year. The Assembly planned Monday to rewrite SB 401 from a bill regarding tax shelters to one that aligns much of California’s tax law with that of the IRS. That includes canceling taxes on forgiven mortgage debt and on recipients of federal renewable energy grants.”
Read more: http://www.sacbee.com/2010/04/06/2657410/california-expected-to-cancel.html#ixzz0kMw5Xs6U
Homeowners considering walking away from a home or a short sale should do their homework, and above all please seek the advice of a tax preparer who knows the ins and outs of the debt forgiveness laws.
With so many bills and laws that have passed it almost seems like a full time job keeping up with all the changes. I read a recent article in the SF Gate web site I thought would help to make sense of it all. Here is an except.
Californians who lose their homes in a foreclosure, short-sale or deed in lieu of foreclosure this year could be hit with a state income tax on canceled or forgiven debt.
A state law that temporarily exempted many homeowners from this tax at the state level expired at the end of last year. Attempts to revive it have not been successful.
The state law was similar to a federal one that exempts many homeowners from federal tax on canceled mortgage debt. The federal law remains in effect through 2012.
The state-tax hit could be substantial and the rules are complex. People in mortgage trouble should consult a qualified tax professional.
Read more:
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