Recent developments have made Short-Selling your home make even more sense. Beginning in January 2009, homeowners in California who short-sell their home would have to pay State Tax on the difference between what they owed on their loan, and what the home sells for. This made many people reluctant to do so, and thus went into foreclosure instead. On April 14, 2010 (the day before tax day), the state legislature and Governor Schwarzenegger extended the Mortgage Debt Forgiveness Relief Act through 2012 to match that of the Federal Government. This means, there are no tax implications on mortgage debts on owner-occupied properties. 
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