Mortgage debt forgiveness may be taxable in CA
Last updated 1/24/2008 at Noon
SACRAMENTO — California does not automatically conform to the “Mortgage Forgiveness Debt Relief Act of 2007” signed by President Bush on December 20. In order for the provisions of this act to apply to California, the legislature must enact conforming legislation.
The “Mortgage Forgiveness Debt Relief Act of 2007” was enacted to provide relief to families hit by the sub-prime mortgage market. Under California tax law, however, debt forgiven following mortgage foreclosure or renegotiation is considered income for tax purposes and may result in a tax liability for taxpayers.