July 22, 2011
Home Mortgage Relief: What the Mortgage Relief Act Means For Families
The home mortgage relief act that has been passed in the state of California is giving a lot of families that have lost their jobs and their homes due to the economic crisis, something to be happy about. Before this act was implemented, if an individual owed a debt to someone and they had this debt canceled or forgiven, the amount of debt that was canceled could be considered taxable income.
Any debt that was removed through a foreclosure, short sale, or mortgage restructure was previously taxable as income in the state of California. Many homeowners that were already struggling were forced to pay taxes on the debt the bank had forgiven. This just made the process even more difficult for California residents who were in default on their mortgages.
California, which has seen an immense amount of poverty since the outbreak of the economic recession has decided to extend the time frame for this act. This means, that the act will remain in play until the year 2012. According to this act, up to two million dollars of debts around the world will be forgiven for families, one million will be forgiven if you are married filing separately.
Before this act was implemented, residents that resided in California were forced to pay taxes on any deficit account that was acquired during the processing of a foreclosure, loan modifications or a short sale. Individuals were required to report their canceled amounts on their tax forms and they had to render payment for the forgiven amounts thereafter.
The state of California is allowing anywhere between $250,000 to $500,000 to be eliminated. This means, individuals will not be responsible to file these amounts as earned income, therefore their tax amounts when filing after a home has been foreclosed on and some of the debts have been forgiven are not going to burden them in the least.
Learn more about Obama Mortgage Relief Plan Qualifications.
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