As part of the “Fiscal Cliff” deal, congress gave a one-year reprieve to homeowners that are underwater by waiving taxes on forgiven mortgage debt. We are now waiting on the State of California to follow congress’ lead.
Mortgage debt is considered taxable income by state and federal tax collectors. In 2007, federal and state leaders waived the tax law that would have made underwater homeowners pay taxes on the amount forgiven through a short sale, loan modification, and foreclosure. The debt forgiveness expired in December and the state has not extended the forgiveness. As it stands right now, the federal government would forgive their portion of the taxes, but a homeowner underwater would have to pay state taxes on the forgiven mortgage debt.
State Senator Ron Calderon is working to fix the problem. Senator Calderon introduced Senate Bill 30 to waive that tax bill in California for all of 2013. Hopefully, the bill will be fast-tracked and passed on an urgency basis, which requires supermajority approval by both houses. The bill is awaiting a hearing date at this time.
NAR achieved a significant victory in obtaining a safe harbor in the QM rule for loans underwritten to the automated standards of Fannie Mae/Freddie Mac, the Federal Housing Authority, Veterans Administration and Rural Housing Service for up to seven years. Read more about the QM Rule and what it means to you.
From Pacific West Association of Realtors (PWR)