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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107 Aplomb Alley
Charleston, SC 29414
Bermuda Pointe Towns
Residential
MLS# 26018466 / Active
Marsh Front home in West Ashley convenient to shopping, grocery stores, Bees Ferry and more! Garage on the first floor, living on the 2nd floor wit...
126 Fox Chase Drive
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 26018464 / Active
Welcome to one of the most established and sought-after sections of Crowfield, where lifestyle, space, and value come together on an incredible .32...
1989 Hugo Avenue
North Charleston, SC 29405
Union Heights
Residential
MLS# 26018463 / Active
Minutes from Park Circle`s dining scene, downtown Charleston, and the airport, this home puts everything within easy reach. Inside, an open-concept...
Reduced -$35,000
136 Thirteen Way
Cross, SC 29436
Cross Area (west)
Residential
MLS# 26018462 / Active
Escape the noise and discover your own private Lowcountry retreat on 4.76 acres. Whether you`re searching for a weekend fishing getaway, hunting ca...
1140 Black Rush Circle
Mount Pleasant, SC 29466
Dunes West
Residential
Welcome to 1140 Black Rush Circle, a beautifully maintained home nestled on a private wooded lot in the highly sought-after gated community of Dune...
1825 Central Avenue
Summerville, SC 29483
Residential
MLS# 26018456 / Active
Spacious 2,400+ sqft home on Central Ave, set on nearly a half acre. Less than 5 minutes to Walmart, Starbucks, Publix, and numerous restaurants an...
375 Huger Street UNIT Unit F
Charleston, SC 29403
North Central
Residential
MLS# 26018455 / Active
Tucked just steps from Hampton Park and some of Charleston`s favorite restaurants, this classically designed single-family home offers the perfect ...
137 Daniels Creek Circle
Goose Creek, SC 29445
Liberty Village
Residential
MLS# 26018454 / Active
5 Bedrooms + Office + First-Floor Guest Suite | Over 3,000 Sq Ft! This Liberty Village home offers the flexible floor plan today`s buyers are searc...
2014 Saphire Court
Mount Pleasant, SC 29466
Crown Pointe
Residential
MLS# 26018453 / Active
This house is located in a cul-de-sac in Crown Pointe subdivision. It is two stories with a two car garage. Brick front porch, living room, with wo...
208 Red Knot Lane
Mount Pleasant, SC 29464
Tidal Walk
Residential
MLS# 26018452 / Active
Welcome to this beautiful 4-bedroom, 3 bathroom home in South Mount Pleasant! This move-in-ready home features a spacious, open floor plan. The tho...
1515 Maple Grove Drive
Johns Island, SC 29455
The Retreat At Johns Island
Residential
MLS# 26018448 / Active
Beautiful 5BR/2.5BA home on a private corner lot in desirable John`s Island. Main-level primary suite, cathedral ceilings, two-story Great Room wit...
139 Sabal Court
Summerville, SC 29483
Daniels Orchard
Residential
MLS# 26018445 / Active
139 Sabal Court is more than a home, it is a lifestyle rooted in the heart of Summerville`s beloved historic district. Located just minutes from Do...
5259 Angelica Circle
Awendaw, SC 29429
Rialde Farms
Residential
MLS# 26018444 / Active
Welcome to 5259 Angelica Circle, a truly one-of-a-kind custom estate tucked away within the exclusive gated community of Rialde Farms. Perfectly po...
135 Steeple Point Court
Summerville, SC 29485
Steeple Point
Residential
MLS# 26018441 / Active
Welcome to this well maintained 3 bedroom, 2.5 bath home in the desirable Steeple Point neighborhood of Summerville. Situated on a spacious fenced ...
168 Salt Yard Landing
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018439 / Active
Summers Corner! Best lot in Desirable and Limited Heron`s Walk! Easy access to Hwy 165. This premier property is perfectly situated across from a l...
1242 Maryland Drive
Ladson, SC 29456
Moss Point
Residential
MLS# 26018435 / Active
242 Maryland Drive | Ladson, SCCome tour your new home, where everyday living feels effortless. Nestled on a generously sized homesite in an establ...
114 Sunray Lane
Summerville, SC 29486
Shell Pointe At Cobblestone Village
Residential
MLS# 26018434 / Active
Welcome to 114 Sunray Ln! This 4-bedroom, 2.5-bath home offers over 2,200 sq. ft. with an open-concept layout designed for everyday living and ente...
Reduced -$2,000
5413 Clairmont Lane
North Charleston, SC 29420
Cedar Grove
Residential
MLS# 26018430 / Active
Southern charm meets peaceful pond views in this beautifully maintained home in desirable Cedar Grove. With classic Lowcountry architecture, durabl...
4501 Millspring Road
Hollywood, SC 29449
Chaplins
Residential
MLS# 26018429 / Active
Welcome to your private lowcountry sanctuary! Sitting on a pristine wooded acre with circular driveway and no HOA, this home blends rustic charm wi...
1033 Peridote Way
Ladson, SC 29456
Taylor Farms
Residential
MLS# 26018427 / Active
One owner home ready for new owner. Taylor Farms was created in 2023 in the heart of Ladson. Its a great location for quick commute. I-26 is just m...
461 Bramson Court
Mount Pleasant, SC 29464
Moultrie Park
Residential
MLS# 26018425 / Active
Charming and full of curb appeal, this Charleston-style home with a signature pink front door and classic double porches sits on a quiet, traffic-f...
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