| The new California Extension of the Mortgage | | | | The California Extension of the Mortgage Relief |
| Relief Act was in response to a severe housing | | | | Act lengthened the reportable years of other |
| market reversal. In 2007 when the market took | | | | similar legislation and excluded these forgiven |
| a downward turn it left many homeowners in a | | | | debts as taxable income under certain |
| difficult economic situation. Their home was their | | | | circumstances. This Act now covers the years |
| largest investment and biggest financial asset. | | | | between 2007 through 2012. This act specifically |
| When the prices for homes fell below the value | | | | covers homeowners, and if they qualify, they can |
| of the amount still unpaid on their mortgage, they | | | | exclude the forgiven mortgage debt by filing |
| were left with no possibility of selling the property | | | | Form 540X the Amended Individual Income Tax |
| in order to pay off the remaining debt. Many | | | | Return. This does not cover second homes or |
| were left with few alternatives other than | | | | business properties. The limits are between |
| foreclosure. California residents especially | | | | $500,000 per person and $250,000 for married |
| experienced huge losses during this housing crisis. | | | | couples or registered domestic partners filing |
| Due to this downturn, many lenders worked with | | | | separately. The State of California Franchise Tax |
| homeowners by forgiving part or even all of | | | | Board has copies of the necessary forms and |
| remaining loan balances. This solved some of the | | | | guidelines. |
| homeowner's problem, but the forgiven debt | | | | California is taking a proactive stance in extending |
| would then be applied as an asset to their taxable | | | | the Mortgage Relief Act through 2012. By allowing |
| gross income. The lender would file the loss on a | | | | homeowners a respite from the financial damages |
| 1099-C tax form and the homeowner would need | | | | of the housing crisis this state is aiding all residents |
| to file the loan modification as income. | | | | toward a faster economic recovery. |