Debt Forgiveness and State Tax Issues
With all the foreclosure and short sales going on these days, we are seeing many taxpayers with debt forgiveness tax issues. Now on the federal side,...
With all the foreclosure and short sales going on these days, we are seeing many taxpayers with debt forgiveness tax issues. Now on the federal side, we have the Mortgage Forgiveness Debt Relief Act, Insolvency, Bankruptcy and other exclusions. But the reality is that some states may not have adopted the federal tax rules as it relates to debt forgiveness income.
Many states have, but you need to check with your local CPA or tax professional to make sure that you don’t have an issue. We all know that the states are starving for cash these days, so they tend to not be as compassionate when it relates to foreclosures and short sales. Better verify with your CPA to make sure that you don’t have any issues.