This is BIG news for Californian’s who plan on doing a Short Sale or are forced into foreclosure.
The bill, SB401, waives state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. Unlike a similar bill that was vetoed earlier this year, Governor Schwarzenegger said he would sign this bill.
With the plunge in the real estate market, many Californians have found themselves owing much more on their mortgages than their homes are worth. Some have been foreclosed upon or asked their lender to approve a short sale, in which a home is sold for less than the debt, some of which is waived.
Previously, the amount waived has been considered taxable income under California law. The measure passed Thursday would eliminate that tax when a bank agrees to accept less than what is owed on a home.
Therefore, if you were holding off on doing a short sale on your property, due to fears of being overwhelmed by taxes, the coast is now clear! (or clearer…).
If you’d like a free consultation, to see if a short sale can help remove the financial burden you’re going through or to avoid foreclosure, contact us right away.
