“Qualified principal residence” indebtedness is defined as debt incurred in acquiring, constructing, or substantially improving a principal residence. It includes both first and second trust deeds. It also includes a refinance loan to the extent the funds were used to payoff a previous loan that would have qualified.
The tax breaks apply to debts discharged from 2009 through 2012. Californians who have already filed their 2009 tax returns may claim the exemption by filing a Form 540X amendment.
Taxpayers who do not qualify for the above exemptions (e.g., second home or rental property) may nevertheless be exempt under other provisions. Most notably, taxpayers who are bankrupt are exempt from debt relief income tax. Also, taxpayers who are insolvent are exempt from debt relief income tax to the extent their current liabilities exceed current assets.
For more information about mortgage forgiveness tax consequences, go to California Franchise Tax Board’s Mortgage Forgiveness Debt Relief Extended webpage and the Internal Revenue Service’s Mortgage Forgiveness Debt Relief Act and Debt Cancellation webpage. The full text of Senate Bill 401 is available at www.leginfo.ca.gov.
Latest posts by Renee West (see all)
- NEW CONSTRUCTION ON THE BLUFFS OF CORONA DEL MAR.4541 BRIGHTON ROAD, CORONA DEL MAR- “THE CROWN OF THE SEA”. OFFERED FOR $27,995,000. - September 18, 2018
- 9 Del Mar, Newport Coast, Newport Beach, CA. “Truly the finest estate in Crystal Cove”. Listed at $35,000,000. Contact Agent Renee West at firstname.lastname@example.org for full disclosure. - August 30, 2018
- 42 Deep Sea in Crystal Cove, Newport Beach. Offered at $21,995,000. - August 29, 2018