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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819 Descartes Street
Summerville, SC 29486
Nexton
Residential
MLS# 23026233 / Active
READY NOW!! In Nexton's newest 55+ community, this three bedroom Palmetto end unit has been designed with our new Artisan design collection. This c...
Reduced -$5,000
100 Rosewood Drive
Walterboro, SC 29488
Hyde Park
Residential
MLS# 23026218 / Active
Welcome to this charming 1966 square foot brick home featuring 3 bedrooms, 2 bathrooms, and hardwood floors throughout. The spacious kitchen openin...
1088 St Thomas Island Drive
Charleston, SC 29492
Residential
MLS# 23026179 / Active
This 4-bedroom, 1.5-bathroom home is situated on 1 acre and presents a rare opportunity for those with a vision for transformation. Located in an i...
Reduced -$15,000
3809 Tim Ascue Lane
Awendaw, SC 29429
Bee Hive Plantation
Residential
MLS# 23026163 / Active
You'll feel right at home in this Charming Bungalow.Very Quiet Location in North Mt Pleasant with no HOA. This home is conveniently located near aw...
2395 Folly Road UNIT 4a
Folly Beach, SC 29439
Turn Of River
Residential
MLS# 23026143 / Active
Enjoy sunrise views of Morris Island Lighthouse from your front porch. End your day with sunset views from your screened porch at the rear. The res...
Increase +$75,000
7787 Seafield Road
Meggett, SC 29449
Roxbury
Residential
MLS# 23026090 / Active
Discover the Grandeur of 7787 Seafield Rd- A Dual-Home Estate on Over 28 Acres!Nestled in the scenic Meggett area, this expansive property offers a...
5212 New Palm Court
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 23025946 / Active
Welcome home! Beautifully situated on a golf course, this Kiawah floor plan offers three levels of thoughtfully designed spaces made for gathering ...
Increase +$10,000
7682 Kings Grant Lane
North Charleston, SC 29420
Pepperhill
Residential
MLS# 23025918 / Active
PRICE HAS BEEN HEAVILY REDUCED. Welcome to your new home. Move in ready with the owners having completely renovated and updated/upgraded the entire...
Reduced -$2,000
126 Harbor Trace Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
Reduced -$19,100
501 Twin Rivers Drive
Wando, SC 29492
Twin Rivers Towns
Residential
MLS# 23025870 / Active
READY IN MAY!! GROUND FLOOR PRIMARY SUITE!! Located on the corner of a building, the interior boasts an open design offering easy living. The eat-i...
8777 E Fairway Woods Drive
Charleston, SC 29420
Coosaw Creek Country Club
Residential
MLS# 23025829 / Active
BEAUTIFUL NEW CONSTRUCTION HOME on the golf course, with extensive fairway views from the kitchen, family room, and primary bedroom! This is the ON...
Reduced -$40,000
160 1/2 Smith Street
Charleston, SC 29403
Radcliffeborough
Residential
MLS# 23025828 / Active
Magnificent investment opportunity! This 1885 historic home is located in the beautiful Radcliffeborough neighborhood in downtown Charleston. Locat...
Reduced -$41,000
2207 Clubhouse Road
Summerton, SC 29148
Residential
MLS# 23025806 / Active
Don't miss your chance to own this waterfront house on Lake Marion! This home is tucked back in the peaceful Lizzie's Creek. It features a 1 year o...
Reduced -$30,995
1619 Zurlo Way
Johns Island, SC 29455
The Preserve At Fenwick Plantation
Residential
MLS# 23025797 / Active
Welcome to your dream home nestled in a serene cul-de-sac, where luxury meets tranquility. This home is the epitome of inviting--with clean lines f...
Increase +$36,000
220 N Highway 52
Moncks Corner, SC 29461
Residential
MLS# 23025780 / Active
Prime Location! Value is in the land only. There is no information given about the home on this property. This property is currently zoned Resident...
257 Shadybrook Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23025770 / Active
Phase 6 New Release - The STARLING Floor plan. It's the perfect multi-generational solution! Gorgeous Board and Batten Siding in Coastal Sage highl...
70 Grand Pavilion Boulevard
Isle of Palms, SC 29451
Wild Dunes
Residential
MLS# 23025711 / Active
Rare opportunity to be a part of the Wild Dunes Grand Pavilion lifestyle. Ownership in this resort hub area offers unmatched amenities to you & you...
4601 Apple St
North Charleston, SC 29405
Wando Woods
Residential
MLS# 23025707 / Active
Come home to your dream deep-water waterfront retreat on the Ashley River! This captivating elevated home is a rare gem, offering an unparalleled l...
172 Donning Drive
Summerville, SC 29483
The Ponds
Residential
MLS# 23025668 / Active
What a Fantastic Home at a Fantastic Price in the Ponds, look no further, 172 Donning is it! Perfectly located in the Ponds within walking distance...
Reduced -$6,000
2260 Woodland Shores Road
Charleston, SC 29412
General Lee
Residential
MLS# 23025661 / Active
Seller's are very motivated and have dropped price to their bottom line. Took off the market due to time of year! Less than 2 miles to the Riverlan...
Reduced -$30,000
3193 Hugh Bennett Drive
Johns Island, SC 29455
Sea Island Preserve
Residential
MLS# 23025649 / Active
Quick Move-In Opportunity! Estimated Closing February/March 2024. This one won't last!Welcome to Sea Island Preserve. The only brand new luxury gat...
Reduced -$5,000
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