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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544 Lesesne Street
Charleston, SC 29492
Daniel Island Park
Residential
MLS# 26018987 / Active
Welcome to 544 Lesesne Street. With almost 5,000 square feet, this beautifully maintained 3 level, 5 bedroom, 5.5 bath single family home in Daniel...
314 Cypress Knee Landing
Summerville, SC 29483
Limehouse Village
Residential
MLS# 26018986 / Active
Welcome to this Lovely Charleston Style home with iconic double porches in the charming subdivision of Limehouse Village! Featuring 4 bedrooms & 2....
197 Silver Cypress Circle
Summerville, SC 29485
Legend Oaks Plantation
Residential
MLS# 26018985 / Active
Welcome to this beautifully maintained True Homes Riley plan, built in 2016 and ideally situated on a premium lot with picturesque pond and golf co...
124 Brailsford Street
Charleston, SC 29492
Daniel Island Park
Residential
MLS# 26018981 / Active
Welcome to 124 Brailsford Road, located in the highly sought-after Ralston Grove section of Daniel Island Park.This beautifully appointed townhome ...
108 Prospect Way
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 26018980 / Active
Move-in ready in Crowfield Plantation, one of Goose Creek`s most established and amenity-rich communities. Set on a large corner lot with mature tr...
1236 Spring Hill Church Road
Ridgeville, SC 29472
Residential
MLS# 26018976 / Active
Escape the hustle and bustle of city life & discover your own private retreat on over 5 acres in desirable Ridgeville! Nestled among beautiful matu...
702 Simmons Avenue
Summerville, SC 29483
Magnolia Hill
Residential
MLS# 26018975 / Active
This is a quaint and charming Summerville cottage on a tree-shaded lot in an excellent neighborhood. The original construction was in 1901; however...
217 Palmetto Village Circle
Moncks Corner, SC 29461
Spring Grove Plantation
Residential
MLS# 26018974 / Active
Welcome to this beautifully designed home in the highly sought-after Spring Grove community, where thoughtful details and spacious living come toge...
3286 Heathland Way
Mount Pleasant, SC 29466
Charleston National
Residential
MLS# 26018972 / Active
Some homes are about more than square footage. This one is about finding a manageable way into the Mount Pleasant lifestyle. Set in Charleston Nati...
4747 N Constellation Drive
North Charleston, SC 29418
Riverbend
Residential
Completely reimagined and full of character, this thoughtfully renovated home blends timeless design with modern functionality. Distinctive archite...
1831 Bolden Drive
Mount Pleasant, SC 29466
Carolina Park
Residential
Located in the highly sought-after Riverside section of Carolina Park, this beautifully maintained home offers the space, privacy, and flexibility ...
9136 Southern Grove Court
North Charleston, SC 29406
Elms Of Charleston
Residential
MLS# 26018969 / Active
Welcome to 9136 Southern Grove Court, located in the highly sought after 55+ gated community of The Elms of Charleston! Nestled on a quiet cul-de-s...
126 Clearblue Loop
Summerville, SC 29486
Nexton
Residential
MLS# 26018968 / Active
Unpack and Unwind! This Home Comes with So Much Extra: Full Outdoor Kitchen, Extended Porch, All Major Appliances Included, and the beautiful bar s...
924 Pitt Street
Mount Pleasant, SC 29464
Old Village
Residential
MLS# 26018967 / Active
Welcome to an exceptional, newly built residence in the heart of Old Village, where timeless design meets modern luxury. Completed in 2023 and thou...
285 Great Lawn Drive
Summerville, SC 29486
Nexton
Residential
MLS# 26018964 / Active
Discover the perfect blend of charm, sophistication, and convenience at 285 Great Lawn Drive in Brighton Park. This exceptional 4-bedroom, 3.5-bath...
1406 Diamond Boulevard
Mount Pleasant, SC 29466
Crown Pointe
Residential
MLS# 26018963 / Active
Perfectly positioned just 3.5 miles from the beaches of Isle of Palms, this exceptional 4-bedroom, 2.5-bath home in highly sought-after Crown Point...
2416 Tiffany Drive
Charleston, SC 29414
Melrose
Residential
MLS# 26018961 / Active
Come take a look at this brick ranch with 4 bedrooms, 3 full baths - living room, dining room, family room with gas fireplace, screen porch, fenced...
243 N Light Way
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018959 / Active
Welcome to Pine Hills, where resort-style living meets everyday comfort. Enjoy amenities including a resort-style pool, walking/biking trails.The p...
688 Pelzer Drive
Mount Pleasant, SC 29464
Cooper Estates
Residential
MLS# 26018958 / Active
INCREDIBLE OPPORTUNITY - RARE WATER FRONT PROPERTY ON LAKE COOPER! Property is being sold *AS IS*. This 3 bedroom, 2.5 bath with family room, dinin...
536 Four Seasons
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018957 / Active
Rarely does a home of this caliber become available in Four Seasons. Perfectly positioned on one of the largest and most private homesites in the c...
2467 Draymohr Court
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26018956 / Active
Must see! Beautifully maintained townhome in the highly desirable Keswick subsection of Park West. This 4B, 2.5B home boasts gorgeous LVP flooring ...
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