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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12 Marsh Island Lane
Isle of Palms, SC 29451
Wild Dunes
Residential
MLS# 26018893 / Active
Tucked away on Marsh Island, one of Wild Dunes` hidden gem streets,this 4-bedroom, 4.5-bath home offers a rare opportunity to enjoy peaceful coasta...
1826 Telfair Way
Charleston, SC 29412
Mira Vista
Residential
MLS# 26018891 / Active
Welcome to ``The Treehouse`` at MiraVista, where peaceful living among the treetops meets the convenience of Charleston`s most desirable location. ...
25 Montagu Street UNIT Apt C
Charleston, SC 29401
Harleston Village
Residential
MLS# 26018888 / Active
Welcome to Downtown living at its absolute finest! Located in highly desirable Harleston Village, this stunning and exceptionally spacious 1,794 sq...
6530 Pepper Grass Trail
Ravenel, SC 29470
The Refuge At Ravenel
Residential
MLS# 26018886 / Active
Private acreage, thoughtful upgrades, and room to grow! Situated on a 1.27-acre corner lot in a gated community, this 4-bedroom home offers 2,400 s...
1115 Kentwood Circle
Charleston, SC 29412
Lynwood
Residential
MLS# 26018882 / Active
Welcome to 1115 Kentwood Circle, a beautifully renovated home in the desirable Lynwood neighborhood on James Island! Offering the perfect combinati...
3358 Mountainbrook Avenue
North Charleston, SC 29420
Pepperhill
Residential
MLS# 26018881 / Active
Beautifully renovated 4BR/2BA home in the established Pepperhill neighborhood, offering space, flexibility, and standout features you won`t find in...
Reduced -$20,000
2097 Utsey Street
Johns Island, SC 29455
Oakfield
Residential
MLS# 26018879 / Active
Welcome to a home where everyday living feels a little more peaceful. Nestled in Oakfield on Johns Island, this thoughtfully designed home offers t...
153 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018878 / Active
The Graham is a magnificent 2 story with double balconies positioned on a corner and pond homesite. Step inside to find a study with French doors a...
147 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018876 / Active
The Fletcher offers so much! Step inside to find a beautiful study with French doors, separate dining room opening into the great room. The gourmet...
5039 Ballantine Drive
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 26018875 / Active
Nestled in the desirable Woodlands section of Wescott Plantation, this beautifully updated three-bedroom, two-bathroom ranch home offers 1,872 squa...
Increase +$1,500
395 Summerset Lane
Summerville, SC 29483
Residential
MLS# 26018872 / Active
Motivated Seller! BWelcome to your own private slice of the countryside! AS IS....This rare 18+ acre property offers a perfect blend of residential...
710 Riverland Drive
Charleston, SC 29412
Residential
MLS# 26018871 / Active
Welcome to 710 Riverland Drive, ideally located in the heart of James Island just minutes from Folly Beach, Downtown Charleston & less than a mile ...
1527 Pinopolis Road
Moncks Corner, SC 29461
Pinopolis
Residential
MLS# 26018870 / Active
Welcome to 1527 Pinopolis Rd, an enticing retreat nestled in the heart of Pinopolis. This charming all-brick home is your perfect sanctuary, surrou...
103 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26018869 / Active
The Marshall is a beautiful two-story home with extraordinary double balconies, featuring modern space, perfect for family time and entertaining. I...
1230 Augusta Pass Drive
Ridgeville, SC 29472
Timothy Lakes
Residential
MLS# 26018868 / Active
PROPOSED CONSTRUCTION. Introducing the Morgan, a thoughtfully designed floor plan offering the perfect blend of style, comfort, and functionality. ...
421 Bowstring Drive
Huger, SC 29450
Bridges At Seven Lakes
Residential
MLS# 26018864 / Active
This beautifully appointed 5-bedroom, 3.5-bath home is set within Bridges at Seven Lakes, a gated community bordering 259,000 acres of the Francis ...
4005 E Associate Drive
North Charleston, SC 29418
Willow Bend
Residential
MLS# 26018862 / Active
Welcome to a truly elevated townhome living experience. Formerly the community`s showcase model unit, this 1,890 sq. ft. residence offers an array ...
1244 Segar Street
Johns Island, SC 29455
Swygerts Landing
Residential
MLS# 26018860 / Active
Located within walking distance to the BRAND NEW Johns Island Elementary school! 1244 Segar Street offers the perfect blend of comfort, space, and ...
3271 Walter Drive
Johns Island, SC 29455
Village Gardens
Residential
MLS# 26018858 / Active
Enjoy front porch living in this beautifully updated townhouse in the desirable Village Gardens subdivision, just off Maybank Highway with easy acc...
231 Donatella Drive
Goose Creek, SC 29445
Sophia Landing
Residential
MLS# 26018857 / Active
Welcome to one of Sophia Landing`s most charming homes... We`re talking Palm tree landscaping, cathedral ceilings, and a spacious dedicated laundry...
Reduced -$100
237 Oglethorpe Circle
Moncks Corner, SC 29461
Spring Grove Plantation
Residential
Back on the Market No Fault of the SellersWelcome to Spring Grove Plantation, where comfort, style, and everyday convenience come together in this ...
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