New CA Home Mortgage Debt Relief Income Exclusion
The Governor has signed into law the new CA Home Mortgage Forgiveness Debt Relief Income Exclusion retroactive to January 1, 2009 and through 2012. This is an amended opportunity where taxpayers have already filed their returns and were unable to exclude the debt relief income using the insolvency exclusion. For those clients you have on extension awaiting this news, you can complete them.
Where Federal law allows $2 million ($1 million for married taxpayers filing separately), the new California law only allows $500,000 ($250,000 for a married taxpayer or a registered domestic partner filing separately). The good news is that this is sufficient for most homeowners to exclude all or most of the debt relief income from their California tax return.
To expedite processing of amended returns, write “Mortgage Debt Relief” in red across the top of the amended tax return and attach a copy of the client’s federal return, including Form 982.
For more information, visit the FTB Website.
Lee Reams Sr.
Lee T. Reams is the Chief Technical Officer of ClientWhys. He is also an Enrolled Agent having managed a 600-plus client tax practice. Educated as an engineer, with a Bachelor's Degree in Mechanical Engineering, Lee left his engineering career in 1975 to expand his part-time tax practice into a full-time career.