Posted on: 04th Jul, 2008 03:51 am
How much tax will I have to pay if I owe $465, 000 and short sale proceeds will be around $320, 000? Will I have to pay the same amount of tax if I go for foreclosure? The loan is a purchase mortgage with the first worth $400,000 and 2nd $65,000. does the mortgage debt relief act apply to me? I haven't been out of work for 10 months and hence couldn't pay. I do have cc debts but I cannot pay all of them, only one having a low rate of interest. I have about $7000 in the bank and not much as assets just a car paid off and a life insurance policy. How do I deal with this situation?
Hello Smartguy,
In a recent update from the IRS on Feb 4, 2008 they simply stated "The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief."
Meaning you would not be required to pay taxes on the forgiven amount of debt. This applies only to your primary residence.
ALSO this Act only applies to FEDERAL TAX. It does not apply to any State Tax that someone may liable for. And in California, as of June 2008, California itself has not passed any Mortgage Forgiveness Relief - so I am assuming that Larry was commenting about that as well.
Check whether your state has conformed to the H.R. 3648, the "Mortgage Forgiveness Debt Relief Act of 2007.
ALWAYS check with your state's laws to see what applies to you. And always seek professional tax advice as well.
You did not mention if you wanted to try and keep the home. If you do want to try to keep the home, talk to your lender. They have several other options available to you besides a short sale.
Let me know if you are needing more information. Also you may visit home-buddies.com and review the free step by step guide that is available there.
Good luck.
In a recent update from the IRS on Feb 4, 2008 they simply stated "The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief."
Meaning you would not be required to pay taxes on the forgiven amount of debt. This applies only to your primary residence.
ALSO this Act only applies to FEDERAL TAX. It does not apply to any State Tax that someone may liable for. And in California, as of June 2008, California itself has not passed any Mortgage Forgiveness Relief - so I am assuming that Larry was commenting about that as well.
Check whether your state has conformed to the H.R. 3648, the "Mortgage Forgiveness Debt Relief Act of 2007.
ALWAYS check with your state's laws to see what applies to you. And always seek professional tax advice as well.
You did not mention if you wanted to try and keep the home. If you do want to try to keep the home, talk to your lender. They have several other options available to you besides a short sale.
Let me know if you are needing more information. Also you may visit home-buddies.com and review the free step by step guide that is available there.
Good luck.
as of 02/09 has ca conformed to it?
Welcome connie,
The Mortgage Debt Relief Act in California is valid and effective. For further details on this act, check out the following link:
http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml
The Mortgage Debt Relief Act in California is valid and effective. For further details on this act, check out the following link:
http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml
yes, but has it been extended past 2008?
As far as I know, it is extended past 2008.
It's not yet extended past 2008 for ca. Where did you get this info?
Hi Ca,
As far as I know, the Mortgage Forgiveness Debt Relief Act of California has extended past 2008. You can check out the link given in Adonis' post above to know more.
Thanks
As far as I know, the Mortgage Forgiveness Debt Relief Act of California has extended past 2008. You can check out the link given in Adonis' post above to know more.
Thanks
You need to reread the link that Adonis posted - "The California law covers qualified debt forgiven in 2007 and 2008" and "The federal law covers qualified debt forgiven from 2007 through 2012." I sent an email to the CA State Franchise Tax Board, here is their response "It is our understanding we are not extending the Mortgage Forgiveness Debt Relief Law to include 2009. You may continue to monitor our website as any additional information that may be released regarding any changes to the law will be updated there." California is broke - I don't think they are going to extend through 2009 even though they should.
I think you are correct. I thought it applied to 2009 also, but it appears it only applies to 2007 and 2008. Major bummer! With the budget issues surrounding CA, it may seem that this act will not extend past 2009. CA needs all the money it can get.
I am in a similar situation as smartguy above. Does anyone know if I should talk to an attorney (what specialty?) or CPA to make sure I would now owe $$$ to the IRS or my bank?
I am in a similar situation as smartguy above. Does anyone know if I should talk to an attorney (what specialty?) or CPA to make sure I would now owe $$$ to the IRS or my bank?
Hi Dodo!
Welcome to forums!
Consulting an attorney in this regard can be a good option as he would be able to tell you about the laws regarding Mortgage Debt Relief Act in California. But as far as I know, the website of Franchise Tax Board, California states that the Mortgage Forgiveness Debt Relief Law covers qualified debt forgiven from 2007 through 2012.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
Consulting an attorney in this regard can be a good option as he would be able to tell you about the laws regarding Mortgage Debt Relief Act in California. But as far as I know, the website of Franchise Tax Board, California states that the Mortgage Forgiveness Debt Relief Law covers qualified debt forgiven from 2007 through 2012.
Feel free to ask if you've further queries.
Sussane
Hey folks, unless a new bill has been introduced and or passed recently, I believe that mortgage debt is not forgiven past December 31, 2008. both AB 111 and SB 97, which would have extended past 2008, are dead in committee. Unless you have a non recourse loan, you need to go speak with your CPA or attorney before shortselling!
Yes, California Senate Bill 97 - for extending Federal Law to 2009 is not passed into Bill yet. Not sure whether it passed through committee review.
ftb.ca.gov/law/legis/09_10bills/sb97_012609.pdf
leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_97_cfa_20090511_130824_sen_comm.html
Hope CA state does what it did like last year -pass the bill during next week or early Jan.
Non-recourse loan don't get affected. Question is on refinanced loans, and home equity loans.
ftb.ca.gov/law/legis/09_10bills/sb97_012609.pdf
leginfo.ca.gov/pub/09-10/bill/sen/sb_0051-0100/sb_97_cfa_20090511_130824_sen_comm.html
Hope CA state does what it did like last year -pass the bill during next week or early Jan.
Non-recourse loan don't get affected. Question is on refinanced loans, and home equity loans.
I'm confused now ... are you saying that if I hold a non-recourse loan, I don't need to worry about the debt forgiveness relief act in CA because the state government can't come after me for the forgiven amount?
Hi Guest!
Welcome to forums!
It is true that a non-recourse loan will not allow your lender to pursue anything other than collateral. So, if he forecloses the property, he will only be able to recover the property and not the deficient amount resulting from the sale.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
It is true that a non-recourse loan will not allow your lender to pursue anything other than collateral. So, if he forecloses the property, he will only be able to recover the property and not the deficient amount resulting from the sale.
Feel free to ask if you've further queries.
Sussane