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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3292 Queensgate Way
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26019699 / Active
Completely renovated and move-in ready! This beautifully updated 1,300 sq. ft. duplex offers modern finishes, low-maintenance living, and an unbeat...
1837 Sundancer Lane
Goose Creek, SC 29445
St James Estates
Residential
MLS# 26019698 / Active
Welcome to 1837 Sundancer Lane, Goose Creek, SC 29445, an exceptional 4 bedroom, 2 bath residence nestled on a quiet cul de sac in the highly desir...
1667 Wading Heron Road
Charleston, SC 29412
Riverfront
Residential
MLS# 26019697 / Active
Welcome to your opportunity to own a beautifully designed new construction home overlooking a peaceful pond. This elevated Lowcountry residence off...
113 Grimball Street
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019696 / Active
Welcome to 113 Grimball Street, a beautifully appointed 2022 Toll Brothers Camelia floor plan that perfectly blends Lowcountry charm with modern lu...
4 Garth Drive
Charleston, SC 29414
Shadowmoss
Residential
MLS# 26019694 / Active
Welcome to 4 Garth Drive, tucked away on a quiet cul-de-sac in the highly sought-after Shadowmoss Plantation, West Ashley`s only golf course commun...
106 Laurels Curve
Summerville, SC 29485
Irongate
Residential
MLS# 26019693 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.***Welcome to this inviting home in the established Irongate ...
266 Clarabelle Lane
Summerville, SC 29483
Six Oaks
Residential
MLS# 26019692 / Active
October Completion. Step into the Meriwether plan-- This spacious layout features 4 bedrooms + Loft, 3 bathrooms, a flexible loft, and an open-conc...
11 Captiva Row
Charleston, SC 29407
Ashley Hall Plantation
Residential
MLS# 26019691 / Active
Welcome to 11 Captiva Row! This beautifully maintained Colonial brick estate is a hidden gem nestled within the serene and highly sought-after Ashl...
3925 Lybrand Street
Edisto Island, SC 29438
Beach Walk
Residential
MLS# 26019690 / Active
Experience coastal living at its finest in this beautifully positioned 4-bedroom, 3.5-bath marsh front home, perfectly situated just moments from t...
165 Clydesdale Circle
Summerville, SC 29486
Mackey Farms
Residential
MLS# 26019689 / Active
Welcome to a premium corner lot in the desirable Mackey Farms community. Situated beside a peaceful pond, this property offers exceptional privacy ...
4990 Paddy Field Way
Ladson, SC 29456
Mckewn
Residential
MLS# 26019687 / Active
Fantastic opportunity to own a 4 bedroom home with beautiful pond views from the kitchen, living room and master bedroom. This home offers a wide o...
2 McDonough Road UNIT Unit C-11
Folly Beach, SC 29439
Mariners Cay
Residential
MLS# 26019686 / Active
Welcome to Mariners Cay Marina! Located on the Folly River. Private and gated with easy access to Lighthouse inlet, Kiawah/Seabrook, Morris Island,...
3009 Doar Road
Awendaw, SC 29429
Residential
MLS# 26019685 / Active
Set within the serene location of Doar Creek, this thoughtfully designed Proposed Construction Julian floor plan offers refined living on a spaciou...
940 E Estates UNIT Unit 5l
Charleston, SC 29414
Longbranch
Residential
MLS# 26019684 / Active
Tucked away on a quiet cul-de-sac in the desirable LongBranch Point community, this townhome-style condo offers comfortable, low-maintenance living...
1574 Charming Nancy Road
Charleston, SC 29412
Bennetts Bluff
Residential
MLS# 26019683 / Active
Experience the perfect blend of Lowcountry elegance and modern luxury in this exceptional custom home, built just three years ago and ideally situa...
677 Buckhall Court UNIT Unit C
Mount Pleasant, SC 29464
Bay Tree
Residential
MLS# 26019679 / Active
Welcome to BayTree, one of South Mount Pleasant`s best-kept secrets, where an unbeatable location meets exceptional flexibility. Tucked away on a q...
1019 Plantation Court
Mount Pleasant, SC 29464
Snee Farm
Residential
MLS# 26019677 / Active
Rare opportunity in the highly desirable Snee Farm Country Club! This Charleston Single-style home is ready for a complete transformation and offer...
361 Glide Slope Street
Charleston, SC 29492
Point Hope
Residential
MLS# 26019675 / Active
ESTIMATED COMPLETION January 2027! Beautiful Wando floor plan with loft offering exceptional space and functionality. The first floor features a sp...
127 Cozy Nest Way
Summerville, SC 29483
Mallard Crossing
Residential
MLS# 26019673 / Active
Welcome to 127 Cozy Nest Way, located in the desirable Mallard Crossing community in Summerville. You`re just 8 minutes from Nexton Square, 12 minu...
8203 Jack Island
Johns Island, SC 29455
Kiawah River
Residential
MLS# 26019672 / Active
Designed to flow as naturally as the tides that shape the Lowcountry, this thoughtfully crafted residence at Kiawah River offers a seamless connect...
106 Macy Circle
Goose Creek, SC 29445
Persimmon Hill Townhouses
Residential
MLS# 26019671 / Active
Beautifully updated 2 bedroom, 1.5 bath townhome in Persimmon Hill, ideally located in Goose Creek near shopping and dining. Step inside to fresh p...
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