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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59 Ashe Street
Charleston, SC 29403
Elliotborough
Residential
MLS# 24025309 / Active
A prominent property on the corner of Ashe Street, this downtown home has been meticulously renovated, rebuilt entirely while preserving original h...
Reduced -$15,000
10 N Huspah Court
Seabrook, SC 29940
Sheldon
Residential
MLS# 24025298 / Active
Waterfront Opportunity on Huspah Creek - Seabrook, SC*No HOA *Dock Potential*Build Your Dream HomeStep into the heart of the Lowcountry with this r...
Reduced -$55,000
4910 Green Dolphin Way
Kiawah Island, SC 29455
Turtle Point
Residential
MLS# 24025260 / Active
Great Opportunity to own an amazing 2BR/2BA Turtle Point villa with stunning views overlooking the 18th green and lagoon at Turtle Point Golf Cours...
3703 Hartnett Boulevard
Isle of Palms, SC 29451
Forest Trail
Residential
MLS# 24025185 / Active
Contemporary vacation home 2 blocks from the beach . Estimated completion December 2025. The home can be built as an inverted floor plan as shown o...
Reduced -$50,000
420 Carolina Cherry Court UNIT #102
Charleston, SC 29414
Shadowmoss
Residential
MLS# 24024778 / Active
NEW CONSTRUCTION!! Middleborough Condominiums, located in the heart of Charleston's garden district in West Ashley offer luxury and a maintenance f...
Reduced -$20,000
1151 Saint Pauls Parrish Lane
Johns Island, SC 29455
The Gates Of Fenwick Plantation
Residential
MLS# 24024714 / Active
BACK ON THE MARKET AT NO FAULT BY THE SELLER!! Welcome to Your New Home in The Gates of Fenwick Plantation!Discover easy living in this spacious to...
Reduced -$6,000
9002 Palmetto Drive UNIT #512
Isle of Palms, SC 29451
Wild Dunes
Residential
MLS# 24024631 / Active
Enjoy stunning, unobstructed views of the Atlantic Ocean from this 3 bedroom, 3 bath condo in Seascape Villas. This condo is being sold fully furni...
Reduced -$50,000
2473 High Hammock Road
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 24024558 / Active
One of the best priced single family homes on island all w million dollar views. On Ocean Winds 16th. Panoramic 180 degree views of fairway and mar...
Reduced -$100,000
218 E Huron Avenue
Folly Beach, SC 29439
Folly Beach
Residential
MLS# 24024485 / Active
Rare opportunity to live on the Folly River! Just minutes from downtown Charleston, SC, this darling 3 Bedroom, 2 bath riverfront cottage has been ...
705 S Magnolia Street
Summerville, SC 29483
Historic District
Residential
MLS# 24024469 / Active
TWO HOMES IN ONE!! 9 BEDS 9 BATHS OVER 6700 SQ FT COMBINED!! 5 bed 4.5 bath 4700 sq ft Main House PLUS 4 bed 3.5 bath 2000 sq ft Guest House. Locat...
621 Plantation Drive
Santee, SC 29142
Chapel Creek Plantation
Residential
The home of your dreams awaits at 621 Plantation Dr, inside the sought-after golf course neighborhood of Chapel Creek Plantation. This Brand New si...
Reduced -$10,000
174 Whaler Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24024141 / 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...
373 Willows Crescent Drive
Moncks Corner, SC 29461
Lakeview at Kitfield
Residential
MLS# 24024095 / Active
READY THIS FALL! This homesite offers a tranquil wooded view. Lakeview at Kitfield is a tucked away community known for its picturesque views and s...
Increase +$1,000
3427 Colonel Vanderhorst Circle
Mount Pleasant, SC 29466
Dunes West
Residential
MLS# 24024082 / Active
Welcome to Your Mount Pleasant Hideaway!Discover the perfect blend of luxury and comfort in this stunning 4-bedroom, 4-bath residence where modern ...
Reduced -$50,000
1813 Albert Storm Avenue
Moncks Corner, SC 29461
Pimlico
Residential
MLS# 24023888 / Active
Custom charm meets riverfront mischief in this Pimlico beauty--with views of the lake, a dock permit in hand, and taste so refined it might critiqu...
Reduced -$24,000
100 Gray Pine Lane
Summerville, SC 29483
Pineland Village
Residential
MLS# 24023882 / Active
Stylish Southern Living in the Heart of Summerville!Welcome to 100 Gray Pine Lane where charm, comfort, and convenience come together in this beaut...
Reduced -$500
92 Dean Hall Road
Seabrook, SC 29940
Residential
MLS# 24023826 / Active
Welcome to a truly unique property nestled on 68 acres of lush, Lowcountry landscape. This magnificent marshfront estate offers a rare opportunity ...
1099 Refuge Way
Summerton, SC 29148
North Shore
Residential
MLS# 24023776 / Active
Welcome to our beautiful Curtis floorplan! The Curtis is one of our newest cottage floorplans designed for efficient living and comfort. Upon enter...
Reduced -$5,000
1091 Refuge Way
Summerton, SC 29148
North Shore
Residential
MLS# 24023775 / Active
Welcome to the Perry floorplan! This single-story cottage is designed with two cozy bedrooms and two full baths at opposite ends of the home provid...
Reduced -$4,950
516 Yellow Leaf Lane
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 24023511 / Active
Welcome to this stunning home located in a sought-after neighborhood featuring resort-style amenities. Equipped with a complete solar system and el...
Reduced -$2,000
3209 Marshall Boulevard
Sullivans Island, SC 29482
Sullivans Island
Residential
MLS# 24022873 / Active
Golden opportunity to own the most iconic property on Sullivan's Island in over 30 years with arguably the best views from any property in all of t...
Increase +$800,000
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