Mortgage Debt Forgiveness extended! But Not In California! Share
January 2, 2013
Late last night, on the last possible day, Congress FINALLY reached a settlement in the “fiscal cliff” negotiations. As a result, the Mortgage Forgiveness Debt Relief Act has been extended for another year. The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure. However, the state of California did NOT extended it , so check with an expert either a CPA or Attorney to find out if you will be paying state taxes if you do a short sale.
Also under the agreement, so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be re-instituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. The thresholds have been increased and are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction.
Capital gains rates on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for married couples.
(Via California Association of Realtors)