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You now must have healthcare insurance or pay additional taxes to the state of California.

Roth IRA Conversions

Roth IRA Conversions are very popular now. You pay regular tax now on the amount converted (no penalties), but do not pay tax on it later when you take it out to spend. Younger people usually benefit the most from this long-term tax savings plan.

Principal Residence Foreclosure and Short-Sales

New tax laws were passed to address some of these problems. The Mortgage Forgiveness Debt Relief Act allows you to exclude from income up to $2 million of certain home mortgage debt that has been forgiven. It only applies to loans taken out to purchase your primary residence. Home-equity loans used to consolidate bills or buy other items does not qualify for this exclusion.

Other types of Cancelled Debt

Debts cancelled on property that is not your principal residence can still result in taxable income on your tax return. This cancellation of debt income can arise from credit cards, a foreclosure, or short-sales on any property that is not your principal residence. The bank will usually issue a form 1099-Cancellation for this.