By Sam Martinez
(323) 250-3770 – A Short Sale in 2013 will not be harmed by additional tax consequences. President Obama and Congress reached an agreement in the “fiscal cliff” negotiations, and the American Taxpayers Relief Act was signed into law on Wednesday, January 2nd, 2012. The Mortgage Forgiveness Debt Relief Act is now extended for one year, which prevents homeowners from having an additional tax burden when performing a Short Sale.
However, individual states have their own tax laws that apply to a Short Sale. For example, the previous state tax exemption that was provided by the State of California did lapse at the end of 2012. This means that any mortgage debt that is forgiven by a lender in 2013 is now considered taxable state income. In an effort to conform state law with federal law, the California Association of Realtors is sponsoring Senate Bill 30, so that California homeowners will continue to have a Short Sale as a more preferable option to a Foreclosure.
Upon the likely passage of SB 30, that was sponsored by Sen. Ron Calderon of Montebello, the measure will be effective on a retroactive basis to January 1st, 2013. It will provide a short sale with one more year of tax exemption for mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale or loan modification. This includes any amount of negotiated principal reduction.
Sam C. Martinez is a Short Sale Specialist in Los Angeles, California. He is a Real Estate Broker, Commentator, and an Advocate for Made in the USA. He can be reached at http://silverlakebroker.com