CALIFORNIA ANOUNCES NO MORE STATE TAX ON FORGIVEN DEBT!
CALIFORNIA ANOUNCES NO MORE STATE TAX ON FORGIVEN DEBT!
Distressed homeowners no longer have to pay California state income tax on debt forgiven in a short sale, foreclosure, or loan modification. Enacted into law yesterday, the new bill has made it possible to treat of mortgage debt income relief with federal law. Homeowners will now be exempt from both federal and state income tax consequences. The exemption is for an indebtedness of up to $2 million, whereas the new California exemption is for indebtedness up to $800,000 and all forgiven debt up to $500,000!
The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Also, taxpayers who are bankrupt are also exempt from debt relief income tax. Furthermore, taxpayers who are bankrupt are exempt from debt relief income tax to the extent their current liabilities exceed current assets.
The full text of Senate Bill 401 is available in California at www.leginfo.ca.gov.
Contact us at Connect Realty in Fair Oaks and speak with our real estate agents to find out more!
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I’ve been reading along for a while now. I just wanted to drop you a comment to say keep up the good work.
Thanks for posting the article, was certainly a great read!
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