By Jim Wasserman
jwasserman@sacbee.com
Published: Tuesday, Apr. 13, 2010 - 12:00 am | Page 7B
Gov. Arnold Schwarzenegger signed legislation Monday to spare thousands of Californians big tax bills on mortgage debt forgiven in 2009.
The bill, signed days before Thursday's tax filing deadline, will eliminate state taxes on forgiven mortgage debt from 2009 through the end of 2012. The U.S. government has already done the same.
"We're elated because we were waiting to send in our statements," said Daniel Diaz of Whittier. He had forgiven mortgage debt from selling his house in a short sale last year. "Obviously, its a big relief, and finally, something good coming out of Sacramento."
State lawmakers had approved the bill on Thursday.
The signing Monday means many affected Californians won't have to file extensions for their tax returns this week.
The bill, SB 401, by Sen. Lois Wolk, D-Davis, relieves state tax obligations on many people struggling after foreclosures, short sales and loan modifications.
It bans state taxes on up to $500,000 in forgiven mortgage debt, and also prevents the state from taxing federal stimulus funds as additional business income when steered to renewable energy firms.
In a statement Monday, Schwarzenegger said, "It is important that we continue to provide all possible assistance to homeowners who were negatively impacted by the mortgage crisis … and protect them from thousands of dollars in unfair taxes."
Wolk said those affected "can now rest a little easier, knowing they won't be hit with a large state tax bill after already being forced to sell their home at a huge loss."
Mortgage debt is typically considered forgiven by lenders – and eligible for taxation as extra income – during a foreclosure or a short sale. In short sales, lenders accept a price below what's owed to avoid higher costs of foreclosing. The difference is the forgiven debt.
The state Franchise Tax Board estimates about 100,000 Californians will be spared from $34 million in state taxes through 2012 as a result of the new law.
The tax relief plan applies only to people who lost homes in which they lived. Investors are not affected and still owe, says the FTB. State officials say qualified taxpayers don't have to do anything to get the tax break. Those who qualify for federal relief will automatically get the state relief.
Read more: http://www.sacbee.com/2010/04/13/2674065/california-wont-tax-forgiven-home.html#mi_rss=State%20Politics#ixzz0l5PyLIHc
No comments:
Post a Comment