Saturday, October 11, 2008

Foreclosure short sale taxation

The 700 billion bailout by the feds also included a provision with extended the mortgage debt forgiveness law out until 2012.

So as it stands now - If you have a principle residence and acquisition debt - you will not have to pay taxes on the loan forgiveness to the feds until 2012.

However, California has only aligned itself with the feds on this law until the end of 2008. If you have not started your short sale by now. You should review all your options before you sign that short sale listing agreement in California.

SB 1055 California State Tax Relief for Mortgage Debt Forgiven : San Jose-Santa Clara County Real Estate UNCENSORED

SB 1055 California State Tax Relief for Mortgage Debt Forgiven : San Jose-Santa Clara County Real Estate UNCENSORED: "Californians, however, were not completely exempt from any tax liabilities incurred in a short sale or foreclosure because we are also subject to California state tax laws. In order to put California tax laws regarding mortgage debt forgiveness in line with the changes made by HR 3648 to federal tax laws, Gov. Arnold Schwarzenegger signed bill SB 1055 into law this past Thursday.

Though the Senate Bill 1055 now conforms to the federal Mortgage Forgiveness Debt Relief Act of 2007 (HR 3648), it has a difference that may need to be revised in the near future. SB 1055 will only cover discharges from January 1, 2007 to December 31, 2008 in contrast to HR 3648 which covers discharges from January 1, 2007 to December 31, 2009.

Homeowners who qualified and have already filed and included discharge of principal residence indebtedness as income for California purposes may need to file an amended or corrected state income tax form. Consult with a qualified CPA for specific details of your situation; this is not to be regarded as tax advice."