If you are considering a real estate short sale of your home, you should be aware that you might receive a form 1099-C for the amount of the lender's losses.
This is considered loan forgiveness in the eyes of the IRS. If you have other assets such as savings and you are not insolvent, you may end up being responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions.
The forgiven debts include money owed after foreclosure or property repossession or credit accounts that you don't pay.
There are exceptions noted below:
If a lender forgives or writes off $600 or more of a debt's principal (the amount not including interest or fees) must send you and the IRS a Form 1099-C at the end of the year. When you file your tax return for the tax year in which your debt was written off, the IRS will require that you report the amount on the form as income.
Fortunately, the Obama administration passed a law stating that if you are short selling your primary residence, you may be exempt from paying taxes even if a 1099 is submitted to the IRS by the lender.
While you may not have received this form from the creditor, the creditor may have submitted one to the IRS anyway. If you don’t list the income on your tax return and the IRS has the information of the transaction on file, you could get a tax bill or, worse, an audit notice. This could end up costing you more than just the original tax bill.
There are several exceptions stated in the Internal Revenue Code. For example, you do not have to report the income on your tax return if the write off of the debt is intended as a gift, you discharge the debt in bankruptcy, or you were insolvent before the creditor agreed to settle or write off the debt. You should consult a qualified tax and legal counsel to see if these circumstances apply.
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Fickling Hill Road UNIT Tbd
Johns Island, SC 29455
Johns Island
Residential
MLS# 23023742 / Active
LIMITED FIRST PHASE INTRODUCTORY PRICING AVAILABLE NOW!! Introducing Charleston Toy Box - Your Ultimate Luxury Car Condo Community! Discover the pi...
Fickling Hill Road UNIT Tbd
Johns Island, SC 29455
Johns Island
Residential
MLS# 23023741 / Active
LIMITED FIRST PHASE INTRODUCTORY PRICING AVAILABLE NOW!! Introducing Charleston Toy Box - Your Ultimate Luxury Car Condo Community! Discover the pi...
Fickling Hill Road UNIT Tbd
Johns Island, SC 29455
Johns Island
Residential
MLS# 23023739 / Active
LIMITED FIRST PHASE INTRODUCTORY PRICING AVAILABLE NOW!! Introducing Charleston Toy Box - Your Ultimate Luxury Car Condo Community! Discover the pi...
105 Peninsula Drive
Ravenel, SC 29470
Poplar Grove
Residential
MLS# 23023728 / Active
Experience the epitome of modern luxury in this 4-bedroom, 4.5-bathroom masterpiece that defines the concept of your dream home. The provided photo...
Increase +$49,900
1501 Central Avenue
Summerville, SC 29483
Residential
MLS# 23023726 / Active
Development Potential! Located near the retail intersection of Central Avenue and Old Orangeburg Road in the heart of Knightsville- a growing subur...
3000 Middleton Drive
Goose Creek, SC 29445
The Oaks
Residential
MLS# 23023713 / Active
The Cottonwood is a two-story, single-family home featuring a spacious upstairs primary bedroom with two walk-in closets for optimal storage. Also ...
Reduced -$1,000
2000 Middleton Drive
Goose Creek, SC 29445
The Oaks
Residential
MLS# 23023697 / Active
The Ivy is a two-story, single-family home featuring a formal dining room as you enter, which then opens to the great room and kitchen. The versati...
Reduced -$1,000
7 Driftwood Lane
Isle of Palms, SC 29451
Residential
MLS# 23023694 / Active
Absolutely one of the best spots on the Island! Located on the backside of the Isle of Palms, this property has everything one desires for island l...
Reduced -$400,000
29 Broad Street UNIT A, C
Charleston, SC 29401
South Of Broad
Residential
MLS# 23023657 / Active
Imagine owning a piece of Charleston history, a seldom-seen opportunity to purchase a portion of the historic McCauley Davis Building. Sitting amid...
Increase +$100,000
1207 Waterwood Drive
Goose Creek, SC 29445
Greenslake Condominiums
Residential
Located with close proximity to the Naval Weapons Station or 526. This spacious 3 Bedroom and 3 Bathroom unit is VA and FHA eligible and ready for ...
Reduced -$2,900
2393 Folly Road UNIT 2-G
Folly Beach, SC 29439
Marsh Winds Condominium
Residential
MLS# 23023606 / Active
Have you always wanted to live at the beach but prices are too high? This spacious end unit 3 bedroom, 3 bath condo located just across the Folly R...
Reduced -$4,900
1946 Clement Avenue
North Charleston, SC 29405
Chicora Place
Residential
MLS# 23023592 / Active
HOUSE HAS BEEN SUBSTANTIALLY RENOVATED TO THIS POINT: STRUCTURALLY SOUND: NEW TREATED SILLS THROUGHOUT; ADDED PIERS FOR SUPPORT; MOISTURE DAMAGED E...
Reduced -$3,000
4929 N Hwy 17
Awendaw, SC 29429
Awendaw
Residential
MLS# 23023582 / Active
Welcome to 4929 N. Highway 17, a charming and elegant residence nestled in the picturesque town of Awendaw, South Carolina. This stunning property ...
1115 W Oceanview Road
Charleston, SC 29412
Oceanview
Residential
MLS# 23023446 / Active
Elevate your living experience with this remarkable property boasting an unbeatable blend of nature, space, and functionality. An opportunity like ...
209 Black Street
Walterboro, SC 29488
Residential
MLS# 23023382 / Active
This diamond in the rough is located in Historic Downtown Walterboro. The home sits on a large 0.71 acre lot, has a spacious back yard, full front ...
Reduced -$6,000
1880 Andell Bluff Boulevard UNIT C-5
Seabrook Island, SC 29455
Residential
MLS# 23023309 / Active
With an excellent location on C dock, this 35 foot slip has a 15% overhand and can accommodate up to a 38 foot boat. C dock is close to the action ...
Reduced -$15,100
5581 Cypress Cottage Lane
Kiawah Island, SC 29455
Kiawah Island
Residential
MLS# 23023304 / Active
Set on the most substantial and secluded homesite in Cypress Point, boasting .66 of an acre, 3,965 total (2,798 sf in MAIN home and 1,167 sf in GUE...
Reduced -$295,000
5278 Mulholland Drive
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 23023278 / Active
Welcome to this stunning residence nestled within Westcott Plantation, where luxurious living meets the tranquility of a golf course setting. This ...
Reduced -$11,050
406 Gravy Train Street
Charleston, SC 29414
Bermuda Pointe Towns
Residential
MLS# 23023243 / Active
Would you like to own your own brand-new home but need a little help with the down payment? At Bermuda Pointe Towns, there's UP TO 50K IN DOWN PAYM...
700 Daniel Ellis Drive UNIT #3304
Charleston, SC 29412
The Peninsula Condominiums
Residential
MLS# 23023124 / Active
Wonderful upgraded THIRD FLOOR - 2 bedroom/2 bath condo at the Peninsula at James Island. The condo has an open floor plan with beautiful heart pin...
Reduced -$9,800
10 Eagleview Drive
Moncks Corner, SC 29461
Foxbank Plantation
Residential
MLS# 23023046 / Active
INCENTIVE!!! (TIED TO PREFERRED LENDER / ATTORNEY) SPEND $35,000 IN UPGRADED OPTIONS: RECEIVE $20,000 OFF & $5K IN CLOSING COSTS. PLUS THROUGH END ...
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