Although interest rates are nudging upwards, there was some really positive news that you should know about this week.

For distressed home sellers in California, one of the problems with short sales and some foreclosures was the liability for California State Income Taxes on any “forgiven debt”. It looks like that may be disappearing – not a moment too soon for people already suffering economic hardships in the recession.

The Los Angeles Times reports that

“Thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.

“The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.”

The governor is expected to sign this bill.