State Taxes - Foreclosure

[MRC123]

I know we don't have to claim the amount written off on our Federal taxes due to theThe Mortgage Forgiveness Debt Relief Act and Debt, but do we have to claim it as income on our state taxes. I was just thinking about that.

I live in AZ.

[pattona]

MRC,

I glanced through some of your posts but didn't find the beginning one that goes into detail about whether this was a purchase money 1st or a refi. If it's a purchase money 1st then no, since the only "recourse" is the property the lender is not actually writing off any deficiency so no 1099. If it was a refi, watch the video from Prof Shays in the walking away section. Apparently in AZ even if you refied so long as you didn't pull any cash out its still considered a non recourse loan.

Of course the usual disclaimer applies "please check with your tax advisor to understand your specific situation".

[Moe Bedard]

Recent changes in Arizona’s law on home loan payment deficiency from foreclosure for sale are still to become effective in September. The original Arizona anti-deficiency law, which was passed in 1971, prohibits lenders from pursuing former owners of foreclosure for sale and collecting from them the difference between the loan amount and the proceeds of sales from the foreclosure for sale.

Under the new law a previous owner of foreclosure for sale cannot be held liable for the deficiency in loan payment only if he has lived in the foreclosed house for at least six straight months and only if the house has been previously issued a certification of occupancy.

Also, the original provisions of the law remained, such as the size limitation of the property and the classification of the foreclosure for sale property as a single family house.

[pattona]

Thx Moe, I did read about this law coming into effect and it should be watched. There is a fair amount of opposition so it very well may get repealed.