California tax law change excludes mortgage forgiveness

In a move likely to help 100,000 struggling homeowners, the California Legislature recently passed a law that allows Californians to exclude mortgage forgiveness from their income or tax purposes. “California has been particularly hard hit by the housing crisis,” said state controller and Franchise Tax Board chairman John Chiang, in a prepared release. “This is a critical tax change that will help people in our state who already are suffering the loss of their homes.” The law allows taxpayers to exclude canceled mortgage debt on their principal residence of up to $500,000.