California Retroactively Extends Mortgage Debt Forgiveness Tax Relief, But Only For 2013 -Tuesday, September 9, 2014
At the end of July, the California state legislature enacted an extension of its modified conformity to federal mortgage debt forgiveness tax relief for 1 year, through 2013. The law allows exclusion of income realized as a result of debt reduction on a taxpayer's principal residence resulting from a loan modification, workout, short sale, foreclosure, or deed in lieu of foreclosure. It was retroactively extended to apply only to discharges occurring on or after January 1, 2013, and before January 1, 2014. Qualified principal residence indebtedness is limited to $800,000 ($400,000 for married/RDP filing separate), and taxpayers may exclude from gross income up to $500,000 ($250,000 for married/RDP filing separate) of mortgage debt forgiven.