Now, the California home owners can relieve their worries about paying their state tax on the forgiven mortgage debt after they short selling their house.
The federal government has suspended taxes on forgiven mortgage debt from 2007 through 2012 and California suspended it for the 2007 and 2008 tax years. But disagreements over the business tax refunds stalled a bill extending it to 2009.
So, in California, those homeowners who did short sell their homes or lost their homes in foreclosure in 2009 can run into thousands of dollars from state tax.
According to the Sacramento Bee, FTB will release the details tomorrow(4/9/10) but according to FTB “Once the Governor signs this into law, California taxpayers will not have to do anything. If they qualify for federal relief on the mortgage debt forgiven, then they will also qualify for state income tax purposes. California Form 540 starts with federal adjusted gross income so there will be no adjustment necessary to properly reflect the state adjusted gross income amount for this issue.”
So, No Worries! California homeowners will not have to do pay the state tax and federal taxes on forgiven mortgage debt.
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