Income tax filing is just around the corner, but here are a couple of tax tips owners may want to keep on hand:
1. Congress, reacting to the subprime mortgage mess (in San Diego and elsewhere), has provided welcome tax relief to San Diego homeowners facing foreclosure. In the past, if a mortgage lender foreclosed on a property and it sold for less than what was owed, income taxes were due on that so-called forgiven debt.
In other words, a homeowner in San Diego who sold for less than what was owed on the home would still owe income taxes on the loss suffered by the mortgage lender. Now, for 2007-2009 tax years, this so-called forgiven debt will no longer be taxed up to a $2 million cap. This provision may also be applied to amounts forgiven when qualifying loans are restructured in order to reduce the principal amount owed to the lender.
2. New to 2008 is an IRS provision that allows a surviving spouse who sells a primary residence no later than two years after the spouses death to exclude as much as $500,000 in capital gains on the sale from taxable income.
In years past, if a home was sold in a year after the death of a spouse, when a joint return could no longer be filed, the maximum gain exclusion was $250,000. To qualify for this benefit, the exclusion requirement must have been met immediately before the spouses death and the surviving spouse must not have remarried as of the date of sale.
Of course, I am no tax expert (just a San Diego Realtor) and am just passing along a couple of tips from our accountant. Please consult your own!