Folsom Short Sale Specialist Announces Debt Relief Act Extended

California state Taxes after short sale
Folsom Certified Short Sale Specialist: what about California’s Mortgage Debt Relief Act?
Short Sales, Foreclosures and loan modifications are still non taxable events as far as federal taxes are concerned… the Mortgage Debt Relief Act of 2007 provisions have been extended. Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence.
The “American Taxpayer Relief Act of 2012’’   extends mortgage cancellation relief for home owners or sellers who have a portion of their mortgage debt forgiven by their lender, typically in a short sale or foreclosure sale for sellers and in a modification for owners. Without the extension, any debt forgiven would be taxable, which, for underwater households, represents a financial burden. The extension is for one year and is in Sec. 202 of the bill.
Struggling homeowners in California can breathe a sigh of relief knowing that Congress has included an extension of Mortgage Forgiveness Debt Relief Act in an eleventh hour bill to avoid a possible fiscal cliff crisis. The Act that was scheduled to expire on December 31, 2012, was extended in the American Taxpayer Relief Act until December 31, 2013. Don Faught, the president of the California Association of Realtors, credits realtors in the association for their role in advocating for this extension of the Mortgage Forgiveness Debt Relief Act.
This relief will benefit homeowners who will have received mortgage debt forgiveness as a result of a reduction in principal (loan Modification), foreclosure, short sale or deed in lieu of foreclosure. Under the United States Federal Tax Code, any debt that is forgiven, including mortgage debt, is treated as income and, therefore, subject to income tax. As the expiration date drew near, homeowners rushed to complete short sales before the end of the year to avoid tax on the difference between their mortgage debt and the sale price. For many, this tax would have been thousands of dollars. By extending the Act, homeowners will not have to pay income tax on mortgage debt forgiven up to two million dollars. Please check with your tax professional for all applicable scenarios as not all mortgage debt is subject to the Mortgage Forgiveness Debt Relief Act.
What about California state Taxes after short sale and the California mortgage debt relief?
REAL ESTATE: State moving on mortgage debt relief
Considering a Short Sale in Sacramento, El Dorado or Placer County? Questions on your particular situation?
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