A newly enacted California law provides a tax break to borrowers whose mortgage debt was forgiven through a foreclosure, short sale, or loan modification got approval just days before the April 15th tax deadline. The new law allows most taxpayers to exclude canceled mortgage debt income of up to $500,000 on their principal residence, or up to $250,000 for married individuals filing separately. It applies to debt forgiveness in 2009 through 2012.
A Federal tax break (Mortgage Forgiveness Debt Relief Act of 2007, which is in effect through the tax year 2012) was already in place to address this particular issue but this now helps distressed California home owners breath a little easier when doing their taxes this year and the next.
If you have a question about short sales or selling your home that is upside down in its mortgage. Give my office a call and we can help.
-Jason Elrod
