Clarification of LA Times Mortgage Debt Forgiveness article
A recent article in the Los Angeles Times discussing the expiration of the Mortgage Debt Forgiveness Act may have caused some confusion for homeowners and REALTORS®.
The article stated, “Some Californians won’t face higher taxes…because a state law enacted in 2010 shields homeowners from paying taxes on any benefit from a short sale...” This may imply that not all California short sales are exempt from taxes. The article clarifies in subsequent sentences that only those who received a loan modification would be hurt by the expiration of the debt forgiveness law.
Specifically, ALL California homeowners who sold their home in a short sale will not pay taxes on the mortgage deficiency, but those who received a loan modification are not exempt from taxes.
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