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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3640 Tidal Flat Circle
Mount Pleasant, SC 29466
Stratton By The Sound
Residential
MLS# 26018424 / Active
Stunning views overlooking Copahee Sound from desirable corner lot offering both scenic vistas and the privacy of wooded wetlands. Outdoor living i...
2039 Bishop Drive
Charleston, SC 29414
Church Creek
Residential
MLS# 26018423 / Active
Welcome to 2039 Bishop Drive, a truly exceptional home where quality craftsmanship and meticulous care are evident at every turn. Lovingly maintain...
Reduced -$16,000
107 Alyssa Lane
Summerville, SC 29483
Corey Gardens
Residential
MLS# 26018422 / Active
Welcome home to 107 Alyssa Lane! This adorable 3-bedroom, 2.5-bath townhouse has been thoughtfully renovated and is ready for its next owner. Conve...
7945 Timbercreek Lane UNIT E
North Charleston, SC 29418
The Park At Rivers Edge
Residential
MLS# 26018421 / Active
Discover effortless Lowcountry living with this beautifully maintained townhome ideally located in the heart of North Charleston. This inviting hom...
181 Huguenot Trail
Huger, SC 29450
French Quarter Creek
Residential
MLS# 26018420 / Active
Welcome to French Quarter Creek, one of the Lowcountry`s newest and most sought-after communities, where this immaculate single-story gem sits grac...
506 Scotch Range Road
Summerville, SC 29483
Scotch Range
Residential
MLS# 26018419 / Active
If you`ve been dreaming of a peaceful retreat with room to breathe, this is the home for you. Enjoy scenic views of rolling farmland & the beauty o...
1613 Farmers Way
Mount Pleasant, SC 29466
Liberty Hill Farm
Residential
MLS# 26018417 / Active
The Riviera II design embodies Lowcountry living at its finest -- elevated, light-filled, and thoughtfully designed for modern comfort. This beauti...
563 Rutledge Avenue
Charleston, SC 29403
Westside
Residential
MLS# 26018415 / Active
Welcome to 563 Rutledge Avenue [Construction To Be Completed: August 3rd, 2026] this masterful high-end renovation is an inviting, classic Charlest...
8867 Salamander Road UNIT #40
North Charleston, SC 29406
Pinckney Place
Residential
MLS# 26018414 / Active
Welcome to the Lantern plan at Pinckney Place -- a spacious two-story new construction home on a private semi-fenced in homesite. This open-concept...
Reduced -$10
4991 Timber Race Course
Hollywood, SC 29449
Plantation At Stono Ferry
Residential
MLS# 26018413 / Active
With impeccable craftsmanship, sophisticated modern design, and the ease of primarily single-story living, this one-of-a-kind residence in The Plan...
131 Highwoods Plantation Avenue
Summerville, SC 29485
Highwoods Plantation
Residential
MLS# 26018412 / Active
This lovely home offers so much privacy it will feel like you have the entire neighborhood all to yourself. There`s a beautiful tree lined, green s...
442 White Magnolia Street
Moncks Corner, SC 29461
The Groves of Berkeley
Residential
MLS# 26018411 / Active
READY SEPTEMBER 2026 - Discover the Conway, a beautiful two-story home in the heart of Moncks Corner. This brand-new construction home offers 5 bed...
Reduced -$13,000
4968 Wyman Boulevard
Summerville, SC 29485
Wescott Plantation
Residential
MLS# 26018410 / Active
Enjoy low-maintenance living with golf course views in this beautifully updated 3-bedroom, 2-bath home offering 2,037 square feet in the desirable ...
164 Longleaf Drive
Walterboro, SC 29488
Longleaf
Residential
MLS# 26018403 / Active
This brand new home is under construction in Walterboro. It`s on a .63 acre lot in Longleaf subdivision with 4 bedrooms, 2.5 bathrooms & a spacious...
500 Bucksley Lane UNIT Unit 207
Charleston, SC 29492
254 Seven Farms Drive
Residential
MLS# 26018402 / Active
Beautiful 3 bed 2 bath condo on Daniel Island! Gourmet kitchen with quartz countertops, granite sink, stainless steel appliances, and a large islan...
106 James Road
Summerville, SC 29486
Sangaree
Residential
MLS# 26018401 / Active
Welcome to 106 James Rd , where comfort and charm come together in one of Summerville`s most convenient locations. This beautifully maintained home...
163 Emerald Isle Drive
Moncks Corner, SC 29461
Moss Grove Plantation
Residential
MLS# 26018400 / Active
This immaculate, move-in ready home offers a perfect blend of style, space, and functionality. Upon entering, you will immediately notice the beaut...
438 White Magnolia Street
Moncks Corner, SC 29461
The Groves of Berkeley
Residential
MLS# 26018399 / Active
READY SEPTEMBER 2026 - Welcome to the Windsor, a beautiful two-story single-family in the heart of Moncks Corner. This home is designed for both st...
Reduced -$19,742
270 Harvest Grove Lane
Summerville, SC 29485
Limehouse Farms
Residential
MLS# 26018397 / Active
This new two-story townhome offers ample space to live and grow. An open-concept layout comprises the first level, combining the kitchen, living an...
446 Doane Way
Charleston, SC 29492
Beresford Commons
Residential
MLS# 26018394 / Active
446 Doane Way is a residence with a functional layout and modern finishes throughout. The kitchen features a center island and a walk-in pantry, cr...
1328 Hermitage Avenue
Charleston, SC 29412
Whitehouse Plantation
Residential
MLS# 26018393 / Active
Completely renovated from the studs out, this move-in ready 3-bedroom, 3-full-bath brick ranch offers the quality and peace of mind today`s buyers ...
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