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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1113 N Shadow Drive
Mount Pleasant, SC 29464
Hickory Shadows
Residential
MLS# 26018385 / Active
Newly renovated home in the heart of South Mount Pleasant, offered under $800K! Conveniently located with quick access to Coleman Boulevard and Hig...
271 Decatur Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018381 / Active
Welcome to this beautifully maintained home in Old Rice Retreat, Cane Bay Plantation! Situated on a pond lot, this spacious 4-bedroom/2-bath home o...
125 Akeley Lane
Summerville, SC 29483
Mallard Crossing
Residential
MLS# 26018377 / Active
Nestled in a desirable neighborhood, this impressive 2,756-square-foot home perfectly balances modern functionality with absolute comfort, offering...
272 Harvest Grove Lane
Summerville, SC 29485
Limehouse Farms
Residential
MLS# 26018376 / Active
This ready to move in July brand new two-story townhome offers ample space to live and grow. An open-concept layout comprises the first level, comb...
328 Grouse Park
Charleston, SC 29414
Grand Oaks Townhomes
Residential
MLS# 26018374 / Active
From the moment you step onto the welcoming covered front porch, you`ll know you`re home. Uniquely designed for maximum privacy, this home is only ...
204 Chamblee Road
Walterboro, SC 29488
Longleaf
Residential
Beautifully remodeled 3-bedroom, 2-bath, two-story home nestled among mature trees with exceptional curb appeal. Step inside to a stunning updated ...
203 Balsam Circle
Summerville, SC 29485
Madison Ridge
Residential
MLS# 26018372 / Active
Welcome to this spacious and beautifully maintained 5-bed, 3.5-bath home in the desirable Madison Ridge community of Summerville. Offering over 3,0...
Reduced -$2,500
274 Harvest Grove Lane
Summerville, SC 29485
Limehouse Farms
Residential
MLS# 26018370 / Active
This ready to move in July brand new two-story townhome offers ample space to live and grow. An open-concept layout comprises the first level, comb...
276 Harvest Grove Lane
Summerville, SC 29485
Limehouse Farms
Residential
MLS# 26018368 / Active
This ready to move in July brand new two-story townhome offers ample space to live and grow. An open-concept layout comprises the first level, comb...
100 Kimeran Lane UNIT D
Summerville, SC 29485
Countryside
Residential
MLS# 26018361 / Active
Located in Summerville`s Countryside subdivision, this two-story townhouse offers 997 sq ft of living space with 2 bedrooms and 1.5 baths. The main...
125 Sugarberry Way
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018360 / Active
Built by Stanley Martin, this beautifully maintained corner-lot home offers the perfect combination of quality craftsmanship, comfort, and location...
2805 Merriams Drive
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26018358 / Active
Experience the perfect blend of luxury, comfort, and Lowcountry charm in this exceptional 5-bedroom, 3.5-bathroom home offering 2,950 square feet o...
1053 Victoria Road
Wando, SC 29492
Shellring At St Thomas Island
Residential
MLS# 26018355 / Active
Elevated coastal living meets modern luxury in this beautifully updated and newly painted home. Showcasing a bright, fully renovated kitchen with p...
2451 Draymohr Court
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26018349 / Active
Live the Mount Pleasant lifestyle in this turnkey & light-filled end-unit townhome just minutes from beaches, dining, and golf cart-friendly conven...
5012 Cranesbill Way
Johns Island, SC 29455
Sea Island Preserve
Residential
MLS# 26018348 / Active
Warm, airy and welcoming from the moment you walk in. Built in 2022, this thoughtfully designed home sits on a generous 0.37-acre lot and is ideal ...
228 Swallowtail Court
Mount Pleasant, SC 29464
Tidal Walk
Residential
MLS# 26018347 / Active
Welcome home. A lovely 4BD/3.5BA home in Tidal Walk, ideally located off Long Point Rd near Belle Hall shopping, I-526, the airport, beaches, and D...
8063 Jack Island Drive
Johns Island, SC 29455
Kiawah River
Residential
MLS# 26018345 / Active
Quinessential Lowcountry home in Kiawah River, built by renowned Delpino Custom Homes. This home is perfectly situated beside dedicated green space...
1463 Tomato Farm Circle
Mount Pleasant, SC 29464
Heirloom Landing
Residential
MLS# 26018344 / Active
Lowcountry living at its finest! Literally minutes from Sullivan`s Island, Old Village, Shem Creek & only a year NEW, this thoughtfully designed st...
5817 Chaucer Drive
Hanahan, SC 29410
Yeamans Park
Residential
MLS# 26018342 / Active
Motivated Seller! Exceptional redesigned and recently rebuilt home (2022) in desirable City of Hanahan, SC. Beautiful bright open floor plan, and n...
Reduced -$20,000
449 White Magnolia Street
Moncks Corner, SC 29461
The Groves of Berkeley
Residential
MLS# 26018341 / Active
READY SEPTEMBER 2026-Welcome to the Georgetown, a beautiful single-story home located in the heart of Moncks Corner. This stunning new construction...
Reduced -$8,175
102 Dream Street
Summerville, SC 29483
Braeland
Residential
MLS# 26018339 / Active
Fully renovated 3 bedroom, full 3 bathroom home. This home is in a great location, convenient to all that Summerville has to offer. Downstairs you`...
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