Yesterday the California Senate voted 21-15 to approve legislation that would relieve the tax liability of California homeowners from who have had forgiven debt from a foreclosure or short sale. The bill will make changes to the state’s law to make it more consistent with the federal tax law.
The bill is now in front of the governor and if signed it will become immediately effective. It is retroactive to include the 2009 tax year and the exemption on state taxation of forgiven mortgage debt would remain in force through 2012.
For more information about Forgiven Debt Tax download our FAQ
or for more information on the Mortgage Debt Forgivness Act and Federal Tax Law visit the IRS website.