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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240 Captain Kidd Court
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018925 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
245 Captain Kidd Court
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018924 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
242 Captain Kidd Court
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018923 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
244 Captain Kidd Court
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018922 / Active
Welcome to Horizons, an exclusive 55+ gated active adult community situated in the highly desirable Carnes Crossroads masterplan. Residents enjoy l...
411 Pelican Flight Drive
Dewees Island, SC 29451
Dewees Island
Residential
MLS# 26018921 / Active
Welcome to 411 Pelican Flight Drive, an extraordinary oceanview estate where timeless architecture, luxurious finishes, and unmatched privacy come ...
2008 Riverbend Drive
Charleston, SC 29412
Riverbend
Residential
MLS# 26018916 / Active
MOVE-IN READY NOW! Nestled beneath majestic grand oak trees on scenic James Island, Riverbend is a boutique waterfront community offering deep-wate...
Reduced -$25,000
1040 Yorktown Drive
Charleston, SC 29412
Queensborough
Residential
MLS# 26018915 / Active
Welcome to 1040 Yorktown Drive, a beautifully renovated home in the heart of James Island! This move-in-ready home offers 3 bedrooms, 3 full bathro...
1037 Fitzgerald Court
Summerville, SC 29485
Summers Corner
Residential
VA assumable loan available. Built in 2024, this home offers all the benefits of new construction without the wait. Featuring the largest floor pla...
Reduced -$21,000
4517 Nestwood Street
Ladson, SC 29456
Woodside Manor
Residential
MLS# 26018910 / Active
Welcome to 4517 Nestwood Street, a beautifully renovated brick ranch in Woodside Manor, offering three bedrooms, 1 1/2 large bathrooms & dressed in...
109 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018909 / Active
This Jackson B two-story, double balcony home showcases a convenient first floor guest suite, followed by a spacious open great room with 10ft ceil...
Reduced -$6,300
151 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018907 / Active
The Fletcher is an open 2-story home featuring a secondary bedroom and full bathroom on the first floor, great for visiting family or guests. The g...
118 Milton Drive
Goose Creek, SC 29445
St James Estates
Residential
MLS# 26018905 / Active
Looking for room to spread out with no HOA? You`ve found it! Welcome to this charming all-brick, three-bedroom, two-bath ranch with an attached gar...
1051 Oyster Drill Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018904 / Active
Discover HORIZONS, a place where you can wake up with countless opportunities but no commitments. Where new friends share stories, ideas and advent...
Reduced -$9,700
4374 Sea Forest Drive
Kiawah Island, SC 29455
Windswept Villas
Residential
MLS# 26018903 / Active
Rare opportunity to own an income-producing 3 bedroom, 3 bath villa in Windswept. This beautiful, sunny and spacious END UNIT, has 2 decks, a lagoo...
228 Shortmarsh Street
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018902 / Active
Welcome to refined Lowcountry living in the sought-after West Lake at Cane Bay community. This beautiful home combines comfort, style, and thoughtf...
306 Willows Crescent Drive
Moncks Corner, SC 29461
Lakeview at Kitfield
Residential
MLS# 26018901 / Active
Assumable 4.5% interest rate! Welcome to 306 Willows Crescent, where comfort, space, and modern living come together in one of Moncks Corner`s grow...
107 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018900 / Active
The Montgomery is a beautiful spacious one-story plan offering 10` ceilings and 8` doors. Inside you will find an on-suite with bedroom, walk-in cl...
752 Clay Field Trail
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018899 / Active
The Ashley- This Charleston style home features a full front porch and lots of southern charm. There is luxury vinyl plank flooring throughout the ...
101 Santee Court
Summerville, SC 29486
Sangaree
Residential
MLS# 26018896 / Active
Welcome to 101 Santee Court, a beautifully updated 1.5-story home in the heart of Summerville`s desirable Sangaree subdivision. This 3-bedroom, 2-b...
3616 Yacht Club Road
Edisto Island, SC 29438
Edisto Beach
Residential
MLS# 26018895 / Active
Experience the best of beachfront living in this beautifully maintained oceanfront home on Edisto Beach. With an outstanding rental history and tho...
3104 Accabee Road
North Charleston, SC 29405
Victory Park
Residential
MLS# 26018894 / Active
This single-family home presents an outstanding fix-and-flip or buy-and-hold investment opportunity in one of the Charleston area`s most desirable ...
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