Mortgage Debt Forgiveness

If you still have mortgage liability after foreclosure, any amount forgiven by the lender is generally ordinary income. However, for debt discharged on or after January 1, 2007, and before January 1, 2013, the debt forgiveness is treated as tax free if the property is your primary residence. The limit on qualifying debt is $2 million ($1 million for a married person filing separately).

Interest and Property Taxes

Home mortgage interest on up to $1 million ($500,000 if married filing separately) of home acquisition loans secured by your principal residence and/or second home is fully deductible. You also may deduct mortgage interest on a home equity loan or line of credit up to $100,000 ($50,000 if married filing separately). Therefore, you can deduct interest on total home debt up to $1.1 million ($550,000 if married filing separately).

Santa Clara County, Property Taxes

In Santa Clara County: If you're 55 or older, you can sell your appreciated primary residence to buy a new primary residence and pay the same property taxes if the value of the new home is equal or less than the old home. It can only be done once...

i.e. You bought a home for $500,000 for a primary residence in Santa Clara County. You sold it for $750,000. You bought a new primary residence for $750,000. You might be able to pay the old property taxes.