The California Association of Realtors (CAR) is lobbying to reinstall California’s expired mortgage debt forgiveness tax relief, which expired Dec. 31, 2012, along with the federal version.
A 12th-hour passage of the “American Taxpayer Relief Act of 2012″ (the so-called “fiscal cliff bill”) extended the federal Mortgage Forgiveness Debt Relief Act and other key tax relief provisions for housing consumers.
In California, Senate Bill 30 (Ron Calderon, D-Montebello), if passed, will extend until Dec. 31, 2013 a tax exemption on mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification that includes a principal reduction.
“We applaud Senator Ron Calderon for acting so quickly on an issue that’s critical to the housing market, said CAAR President Don Faught.
“We urge the California Legislature to also act quickly and pass a measure that will give hope to tens of thousands of California homeowners and provide the vital financial relief they need in order to make important personal financial decisions,” Faught added.
Because the previous California exemption has expired, forgiven mortgage debt is now considered taxable state income. Passage of SB 30 would retroactively reinstate the rule to Jan. 1, 2013.
“The swift passage of SB 30 is critical not only for economically-stressed Californians who have lost their homes through short sales but also for the continued recovery of California’s housing market,” Calderon said.
“To heap an insurmountable tax bill on top of the pain and emotional duress of losing a home is unconscionable,” he added.