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.
Modify Search Criteria
3115 Ion Avenue UNIT C
Sullivans Island, SC 29482
Sullivans Island
Residential
MLS# 23010359 / Active
New co-ownership opportunity: Own a share of this turnkey home, professionally managed by Pacaso. Learn more about our limited-time year-end offer!...
Reduced -$27,000
3115 Ion Avenue UNIT D
Sullivans Island, SC 29482
Sullivans Island
Residential
MLS# 23010357 / Active
New co-ownership opportunity: Own a share of this turnkey home, professionally managed by Pacaso. Learn more about our limited-time year-end offer!...
Reduced -$27,000
114 Berkeley Circle
Summerville, SC 29483
Residential
MLS# 23000210 / Active
Great business opportunity to be in the heart of Summerville! 0.692ac Lot located just off of N Main Street near EarthFare,on the road leading to t...
Reduced -$64,000
39 Waycross Drive
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22018508 / Active
PROPOSED CONSTRUCTION: Introducing the Putnam at Timothy Lakes. Find your very own slice of paradise in the community of Timothy Lakes. Located nea...
Increase +$8,000
52 Westfield Drive
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017468 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Brewster at Timothy Lakes. Find your very own slice of paradise in the community of Tim...
15 Darby Meadow Lane
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017466 / Active
PROPOSED CONSTRUCTION -- The Ludington. Step through the foyer where you can access the guest bedroom/full bath or head into the spacious family ro...
13 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017464 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Mercer at Timothy Lakes. Find your very own slice of paradise in the community of Timot...
44 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017280 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Adams at Timothy Lakes. Find your very own slice of paradise in the community of Timoth...
9 Edisto Crossing Court
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 22017273 / Active
PROPOSED CONSTRUCTION: NOW SELLING PHASE 3! Introducing the Townsend at Timothy Lakes. Find your very own slice of paradise in the community of Tim...
268 Little Oak Island Drive
Folly Beach, SC 29439
Little Oak Island
Residential
MLS# 22016385 / Active
Looking for the ultimate in peaceful waterfront view living? There are over 1150 sq ft of wrap-around covered porches and 180 sq ft of open deck to...
Reduced -$100,000
113 E Arctic Avenue UNIT B
Folly Beach, SC 29439
Residential
MLS# 22013630 / Active
Have you been dreaming of owning the ultimate in lavish, luxurious, and elegant Folly Beach oceanfront living? Are you the discerning buyer looking...
Reduced -$399,000
913 Carolina Boulevard
Isle of Palms, SC 29451
Isle Of Palms
Residential
MLS# 21010730 / Active
This home was built by Thomas Evans Construction, one of the island's finest builders. The home is well-maintained with many upgrades in 2022 and 2...
The data relating to real estate for sale on this web site comes in part from the Broker ReciprocitySM Program of the Charleston Trident Multiple Listing Service. Real estate listings held by brokerage firms other than EXP Realty LLC are marked with the Broker ReciprocitySM logo or the Broker ReciprocitySM thumbnail logo (a little black house) and detailed information about them includes the name of the listing brokers. Last updated on 08-03-2025 2:00 PM EST .
The broker providing these data believes them to be correct, but advises interested parties to confirm them before relying on them in a purchase decision.
Copyright 2025 Charleston Trident Multiple Listing Service, Inc. All rights reserved.