If your home was foreclosed or your loan modified you know longer have to worry about claiming the discharged amount due to the Mortgage Forgiveness Debt Relief . California law has conformed, with the federal mortgage forgiveness debt relief act for discharges occurring on or after January 1, 2009 thru 2012.
If you owe a debt to someone else and they cancel or forgave that debt, the canceled amount may be taxable.
The Mortgage Debt Relief Act of 2007 allows taxpayers to exclude that income from the discharge of debt on their primary residence. Debt reduced through a loan modification in connection with a foreclosure, qualifies for the relief. Up to $2 million of forgiven debt is eligible.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, or contact 310-283-3767
