With the number of California notices of default filings hitting 31,004 in February, it is no wonder California signed into legislation relief for homeowners who lost their home home due to foreclosure or short sale.
California had been lagging behind the federal government in cancelling taxes owed on the "short amount" or the difference between the mortgage amount and what the house actually sold for at short sale or in the case of foreclosure, trustee sale.
I had a client call me in a panic last week letting me know that although he would not be taxed by the federal government, his CPA told him he would have to pay California State taxes on the $100,000 difference between what he owed the bank and the sale price of his home at trustee sale. He was flabbergasted and scared. I told him with California leading the nation in foreclosures, there would no doubt be a movement by people like him to get California on the same page as the feds regarding taxing forgiven mortgage debt.
Low and behold as of April 9th, 2010, thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.
The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.
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This is something I've been calling my short sale sellers from last year about this week to make sure they look into it.
The ripple affect for all these foreclosures will be felt for years. Good step in the right direction to help.
Fran, do you think it is enough to help stabilize the market or is it to little to late?
Nick,
I read an article in the LA Times that says foreclosures are on the increase in California and that is my experience as well being an REO listing agent. How can the market stabilize when asset manager's are listing homes for far below market to get a quick sale? Even with tax credit's, my market is in a pretty rapid decline as far as prices go. California has a lot of issues!