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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233 Coral Sunset Way
Summerville, SC 29486
Shell Pointe At Cobblestone Village
Residential
MLS# 26018854 / Active
Welcome home to this spacious 5-bedroom, 3-bath home designed for comfortable living and entertaining! The thoughtfully designed floor plan feature...
120 Alexander Street
Charleston, SC 29403
Wraggborough
Residential
MLS# 26018853 / Active
Historic Downtown Charleston 1890 home w/ ADU in the Wraggborough neighborhood. Also shown in MLS as a Multi-unit under a different MLS number. Exc...
903 Butter Road
Bonneau, SC 29431
Pooshee
Residential
MLS# 26018851 / Active
Experience true waterfront living in this stunning, deep-water home on Lake Moultrie. Perfectly positioned on a spacious lot, this property offers ...
8581 Refuge Pointe Circle
North Charleston, SC 29420
The Refuge At Whitehall
Residential
MLS# 26018848 / Active
The Refuge is a quiet, secluded, upscale neighborhood that is convenient to all points of interest and is serviced by excellent schools. This home ...
111 Misty Waters Court
Summerville, SC 29483
South Pointe Estates
Residential
MLS# 26018846 / Active
Rare opportunity, where privacy, layout, and everyday convenience come together in a peaceful cul-de-sac setting. This inviting, 5 bedroom, 3.5 bat...
497 Spring Hollow Drive
Charleston, SC 29492
The Marshes At Cooper River
Residential
MLS# 26018843 / Active
Welcome to 497 Spring Hollow Drive in the highly coveted and desirable neighborhood of The Marshes at Cooper River. If you are desiring an Energy S...
38 Crosscreek Drive
Charleston, SC 29412
Crosscreek
Residential
Owner financing avaiable! Welcome to your very own lakeside home right inside the city limits! I am so incredibly excited to share this extraordina...
8754 Pasture Court
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 26018840 / Active
End-unit townhome in Sunrise at Wescott Plantation in Summerville, SC. This well-maintained home offers 3 bedrooms, 2.5 bathrooms, a one-car garage...
126 Riley Farms Court
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018838 / Active
Loaded with upgrades and customized Popular Fenwick II plan with finished bonus room. Don`t miss this one. Experience one level living on a premium...
Reduced -$25,000
1707 Pinckney Park Drive
Charleston, SC 29407
Stono Park
Residential
MLS# 26018837 / Active
This fully renovated, charming 1940s cottage with a detached ADU, nestled just 4 miles from downtown Charleston is the very home you have been look...
14 Brigadoon Place
Charleston, SC 29414
Shadowmoss
Residential
MLS# 26018836 / Active
Set on a sprawling, private cul-de-sac lot, this exceptional 3,406-square-foot residence offers a rare combination of a resort-style backyard with ...
708 S Laurel Street
Summerville, SC 29483
Historic District
Residential
MLS# 26018834 / Active
HISTORIC DOWNTOWN SUMMERVILLE, 708 S. Laurel Street is a charming 3-bedroom, 2-bathroom home that beautifully blends timeless character with modern...
9271 Ayscough Road
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 26018831 / Active
New roof added in June 2026!! Welcome to this beautifully maintained 3-bedroom, 3-bathroom pond front home in one of Dorchester County`s most sough...
3348 Island Estates Drive
Johns Island, SC 29455
Island Estates
Residential
MLS# 26018829 / Active
Nestled behind mature native landscaping, this home doesn`t just sit on its lot - it thrives. Enjoy mature fruiting fig trees that produce sweet tr...
401 Kinloss Country Lane
Mount Pleasant, SC 29466
Charleston National
Residential
MLS# 26018825 / Active
Welcome to 401 Kinloss Country Lane. Experience easy Lowcountry living and resort-style luxury in one of Mount Pleasant`s most desirable golf cours...
1 Inlet Point Road
Edisto Island, SC 29438
Jeremy Cay
Residential
MLS# 26018822 / Active
NEVER-ENDING OCEAN & BEACH VIEWS from this Architectural Gem located at the end of a private point. Inside Exclusive Jeremy Cay, this home enjoys a...
121 Simmons Street
Mount Pleasant, SC 29464
Shemwood
Residential
MLS# 26018821 / Active
Built in 2023, this award-winning custom home by Hunter Baker Homes is located in highly desirable South Mount Pleasant with views of Shem Creek an...
134 Cooper Circle
Santee, SC 29142
Santee Cooper Resort
Residential
MLS# 26018820 / Active
Located in the gated waterfront community of Santee Cooper Resort on Lake Marion, this charming brick ranch offers the perfect blend of comfort, co...
4054 Aspera Drive
Summerville, SC 29483
The Ponds
Residential
MLS# 26018817 / Active
There is tremendous value in this move-in-ready home located in Cresswind in The Ponds. This property is absolutely perfect if you are seeking a So...
9101 Parlor Drive
Ladson, SC 29456
Tranquil Hill Plantation
Residential
MLS# 26018813 / Active
Charleston SC End Unit Townhome For Sale | 3 Bedroom 2.5 Bath | Dorchester District Don`t miss this rare end-unit townhome for sale in Charleston, ...
8867 Salamander Road UNIT Unit 57
North Charleston, SC 29406
Pinckney Place
Residential
MLS# 26018811 / Active
Welcome to the Ross plan - a spacious new home with all appliances included and builder warranty. Enter through the foyer, passing a powder bath an...
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