When the prices for homes fell below the value of the amount still unpaid on their mortgage, they were left with no possibility of selling the property in order to pay off the remaining debt. Many were left with few alternatives other than foreclosure. California residents especially experienced huge losses during this housing crisis.
Due to this downturn, many lenders worked with homeowners by forgiving part or even all of remaining loan balances. This solved some of the homeowner's problem, but the forgiven debt would then be applied as an asset to their taxable gross income. The lender would file the loss on a 1099-C tax form and the homeowner would need to file the loan modification as income.
The California Extension of the Mortgage Relief Act lengthened the reportable years of other similar legislation and excluded these forgiven debts as taxable income under certain circumstances. This Act now covers the years between 2007 through 2012. This act specifically covers homeowners, and if they qualify, they can exclude the forgiven mortgage debt by filing Form 540X the Amended Individual Income Tax Return. This does not cover second homes or business properties. The limits are between $500,000 per person and $250,000 for married couples or registered domestic partners filing separately. The State of California Franchise Tax Board has copies of the necessary forms and guidelines.
California is taking a proactive stance in extending the Mortgage Relief Act through 2012. By allowing homeowners a respite from the financial damages of the housing crisis this state is aiding all residents toward a faster economic recovery.
Mortgage Relief Act, now aiding all California residents toward a faster economic recovery. Get the inside scoop now on http://www.nphsrealestate.org
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