Homeowners who do short sales — selling their homes for less than they owe to the bank — got a break when a deal was made in Washington on the fiscal cliff. They won’t owe taxes on the difference between the sale price and the loan debt because the Mortgage Forgiveness Debt Relief Act was extended.
Now California may do the same.
Last December, State Senator Ron Calderon introduced a bill — SB 30 — that would extend mortgage debt forgiveness for Californians on their state taxes. If it passes, it will join the federal tax relief that was already extended by Congress.
The California Association of Realtors (CAR) has put its weight behind passage of Calderon’s bill. The trade group sees the bill as critical to the “continued recovery of California’s housing market.” A shortage of homes for sale in the state is driving up prices.
It isn't hard to see why realtors like the bill. Short sales can be another way for them to get business, as sellers work to find buyers whom they can present to banks. The realtors' association also has a stake in seeing the inventory shortage rectified. More short sales means more homes on the market, and that's good for realtors in the state.
If the law is passed, it will be retroactive to the first of the year — it officially expired on January 1 — so that no one who did a short sale after the old law expired will be hit with an unexpected tax bill.