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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18 Indigo Lane
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 23021133 / Active
LOCATION!LOCATION! Seize the opportunity to own this exceptional end unit townhouse! On the lower level, you'll be welcomed by a generously sized p...
Reduced -$10,000
1616 Zurlo Way
Johns Island, SC 29455
The Preserve At Fenwick Plantation
Residential
MLS# 23021115 / Active
Find your happy place in this 4 bedroom, 4 bathroom home. Drive under construction allows for 3 car tandem garage and an abundance of storage. At j...
Increase +$35,000
174 Whaler Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23021076 / Active
If you are looking for open, spacious, light filled spaces with views for days, then welcome home! Sitting on a water lot, this home features beaut...
Increase +$10,000
152 Ashley Bluffs Road
Summerville, SC 29485
The Bluffs At Ashley River
Residential
MLS# 23021067 / Active
Welcome to the stunning 152 Ashley Bluffs. This beautiful home has all you could possibly need and more. You can sit on the front porch, enjoy coff...
Reduced -$5,000
135 Summerwind Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23021054 / Active
Welcome to Summerwind Crossing, Summerville's newest ''Low Maintenance'' Active Adult community. Upon entering The Enthusiast plan you will see how...
Reduced -$5,000
6601 Dorchester Road UNIT #101
North Charleston, SC 29418
Regency Square
Residential
This one bedroom condo has been freshly painted, has LVT flooring, new refrigerator, new water heater and is just waiting for you to add your finis...
Reduced -$5,000
396 Painted Lady Lane
Goose Creek, SC 29445
Landings At Montague
Residential
MLS# 23020903 / Active
Finished home ready to close! Check out the Bristol Townhome by Eastwood Homes! Upon entering the foyer, you can find a beautiful custom built in d...
Reduced -$5,000
392 Painted Lady Lane
Goose Creek, SC 29445
Landings At Montague
Residential
MLS# 23020897 / Active
Finished Bristol townhome by Eastwood Homes & ready to close! Upon entering the foyer, you can find a beautiful custom built in drop zone. In addit...
Reduced -$5,000
5625 Crystal Harbor Lane
Hollywood, SC 29449
Crystal Harbor
Residential
MLS# 23020860 / Active
STUNNING DEEPWATER HOME ON THE STONO RIVER WITH PRIVATE DOCK! This beautiful elevated home is located on a 1-Acre homesite in the quiet subdivision...
Reduced -$525,000
1802 Twin Rivers Drive
Wando, SC 29492
Twin Rivers Towns
Residential
MLS# 23020833 / Active
READY FOR MAY CLOSING! This townhome boasts an open interior design offering easy living. The eat-in kitchen has granite topped counters, 42'' uppe...
3701 Dock Site Road UNIT #108
Edisto Beach, SC 29438
Bay Creek Villas
Residential
MLS# 23020807 / Active
This Bay Creek Villa gives you the opportunity to own a redesigned Villa offering a larger living space than other Villas. It provides ample room f...
492 Sea Cloud Circle
Edisto Island, SC 29438
Wyndham Ocean Ridge
Residential
MLS# 23020746 / Active
Multi-bedroom cottage is an enticing villa home, in a gated community. In this quaint villa you will find a cohesive and well thought out kitchen a...
Increase +$10,000
11 Wappoo Trace Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23020727 / Active
Come build NEW Mason W/BONUS Plan! This one story 3-6BR, 3-3.5BA W/ 3 CAR GARAGE!!!! Standard features include: Laminate Wood Flooring in main livi...
10 Wappoo Trace Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23020725 / Active
Come build NEW Mason Plan! This one story 3-4BR, 3BA W/ 3 CAR GARAGE!!!! Standard features include: Laminate Wood Flooring in main living areas, Wo...
15 Wappoo Trace Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 23020720 / Active
Come build the Crestwood! This 4-5BR 3.5-4.5BA W/ GUEST SUITE DOWN has it ALL! Standard features include: Laminate Wood Flooring in main living are...
Increase +$5,000
2675 Crystal Spring Road
Johns Island, SC 29455
Twin Lakes
Residential
MLS# 23020686 / Active
Tucked away in the heart of Johns Island is a private enclave of Lowcountry style homes at Twin Lake. Nestled amongst the live oaks, this community...
Increase +$75,000
2531 Crystal Spring Road
Johns Island, SC 29455
Twin Lakes
Residential
MLS# 23020666 / Active
Tucked away in the heart of Johns Island is a private enclave of Lowcountry style homes at Twin Lake. Nestled amongst the live oaks, this community...
Increase +$75,000
609 King Street UNIT #440
Charleston, SC 29403
City Of Charleston
Residential
MLS# 23020652 / Active
Coming in 2026! The Peninsula of Charleston is an ownership-model, Continuing Care Retirement Community (CCRC) on King Street in historic downtown ...
2141 Blue Bayou Boulevard
Johns Island, SC 29455
Twin Lakes
Residential
MLS# 23020649 / Active
Welcome to Homesite 33 and the Virginia floor plan, where spacious living meets modern convenience. This home boasts an expansive foyer, a versatil...
Increase +$108,893
2109 Tides End Road
Charleston, SC 29412
The Preserve At The Clam Farm
Residential
MLS# 23020547 / Active
Stunning deep water & tidal creek views make this luxury townhome a dream. Enjoy orange & red sunrises in the morning, & sunsets that transform the...
Reduced -$20,000
1126 Harvey Street
Holly Hill, SC 29059
Residential
MLS# 23020540 / Active
With your creativity for design & floor plan you could have a large & lovely home. Foyer overlooks a sunken formal living room w/fireplace & formal...
Reduced -$50,000
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