We’re from the government… and we’re here to help

Did you snicker when you read, "We're from the government... and we're here to help"?

Believe it or not, the government is actually helping millions?

And if you had a hard time with that, you'll have an even tougher time when I tell you that it's the IRS.

I'm not pulling your chain here either... well, there is a dark side to this too.  We'll get back to that in a minute.

1. Tax Exemption on Debt Cancellation.

Oh, yes, that's been going on for a while... at the national level.

But, if you live in California, taxes on the presumed "gains" have been a specter looming over troubled homeowners since 2008 when the CA debt forgiveness statutes ended.

Let's see, an over-priced $500K home, which you astutely purchased with no money down, falls in price by 40% to $300,000 and you are forced to give it up.  But the State of California is going to take that $200,000 in cancelled debt / debt forgiveness and tax you at 9.55%.  That's $19,100.

Wait, you didn't have the extra $800 when the teaser rate ended to pay the mortgage, but our state government wants you to pony up an additional $19,100.  How is that going to work?

Just the other day, the CA state senate passed SB 401 and the governor has said he will sign it.  This will cause the CA tax forgiveness laws to align with the Federal regulations.  In fact, it will be retroactive to the beginning of 2009, allowing the citizens falling through the crack to "get their fair share."

2. Double-dipping on the Homebuyer Tax Credit

For a limited time, here in California, if you get under contract by April 30^th and close between May 1^st and June 30^th, you can pick up to $8,000 from the Federal government and $10,000 from the State of California.

Now that is a killer deal.  Sure there are limitations - it has to be a new / never lived in home and you must occupy it for two years, but still.

The Dark Side

In six days, if you haven't done so already, you are required to contribute your share of the cost of these benefits.  What, you didn't think it would all get paid for by just printing money, did you?