When I went through foreclosure in 2009. It was the most stressful time in my life, but when I went to go file taxes the next year. I was surprised to find out I had to claim the loss of the house as an income. Needless to say this put me in a way higher tax bracket, the first thought in my head was I was going owe, thousands in taxes , but for the average Joe that doesn’t own tons of real estate expensive cars that defaults on the loan, there is some good news. If you are found to be in a hardship and have had a substantial income change and that’s the contributing reason for your foreclosure. The federal government will waive the taxes owed on that income. But! This is the catch! In some states, like the state of California, as of 2009. This no longer applies and you could be nailed with tens of thousands of dollars in taxes by the state. Now the state of California used to go along with the federal government on this and they adapted the same practices before 2009. Now, after 2009, after losing my home. I ended up owing $11,000, without a job, in this economy and interest that’s now grown to the sum $13,000. It’s like getting hit with the debt that There is no possible way to pay off and it’s going to just get bigger and bigger, a friend of mine, I told this information to was hit with approximately $30,000 after her home was foreclosed on in taxes. Now she was able to prepare for this a little bit because I told her, it’s like the old adage learn from experienced well, I’m experienced.
What to do to lessen this debt
Now there is something you can do to make this all a little more palatable, the amount of money that you claim on your taxes doesn’t necessarily have to be the amount of money that you owe on the home, so let us say you owe on your home $200,000 and you are forgiven the debt by the bank and the home was sold at auction, but the amount of money the home sold for was $110,000 so the amount of money that you claim on your taxes is the lesser amount, but like in the state of California you will owe a lot of tax money and it doesn’t really make sense, if you couldn’t pay your mortgage due to financial difficulties. Why would anyone think you could pay this. Now maybe the state of California… And whatever other states have the same policy, decide to pull in line with the federal government “again” on this great tax burden and retroactively help the people who have lost their homes due to the economy and bad loans by the banks in this country . It really doesn’t make any sense to add insult to the injury, especially! When there’s no hope of ever getting it paid. I am not a tax expert. I am just a person, and this is my experience.
Now I’ve not seen any articles on these taxes, that, people who’ve lost their homes,a and have had to incur these taxes , along with losing their homes. That’s the reason why I wrote this because I’ve noticed there are very few people who know what will happen, and so they can prepare for what hard road lies ahead of them. I hope this has been helpful. This is my contribution to those of you who deep in their hearts really wanted to keep your home and will be faced with this tax burden.