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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254 Cloverleaf Acres Lane
Summerville, SC 29486
The Crossing at St. James
Residential
MLS# 26019606 / Active
Charming Charleston-Inspired Townhome Near Summerville & CharlestonWelcome home to 254 Cloverleaf Acres Lane, located in The Crossing at St. James,...
3367 Dunwick Drive
Johns Island, SC 29455
Fenwick Hills
Residential
MLS# 26019605 / Active
Beautiful 2017 construction on over 1/3 of an acre listed below market value! Tucked away on Johns Island, 3367 Dunwick Drive offers a peaceful ret...
3106 Gallberry Street
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26019604 / Active
Welcome to 3106 Gallberry Street, a turn-key designer home in sought-after Carolina Bay.Thoughtfully updated and beautifully maintained, this home ...
221 Forest Circle
Summerville, SC 29483
Oakdale Estates
Residential
MLS# 26019601 / Active
Folks, we need to talk about the **DETACHED GARAGE AND WORKSHOP.** Because this isn`t some cute little shed where you store a rake and three Christ...
29 Campbell Drive
Charleston, SC 29407
Byrnes Downs
Residential
MLS# 26019600 / Active
Welcome to 29 Campbell Drive, a truly one-of-a-kind designer home in one of Charleston`s most coveted and established neighborhoods, Byrnes Down. T...
4882 Sound View Drive
Mount Pleasant, SC 29466
Hamlin Plantation
Residential
MLS# 26019598 / Active
Tucked along the water in one of Mount Pleasant`s most coveted communities, The Sound at Hamlin Plantation, this is the one you`ve been waiting for...
116 Tall Spruce Drive
Moncks Corner, SC 29461
Conifer Hall
Residential
MLS# 26019596 / Active
Updated and remodeled 3BR/2BA gem in Conifer Hall! All updates completed in 2023: new roof, windows, doors, paint, HVAC and garage door opener. Smo...
478 Trotters Lane
Moncks Corner, SC 29461
Foxbank Plantation
Residential
MLS# 26019595 / Active
Wake up to peaceful pond views and end each day watching the fountain shimmer across the water from your own fenced backyard. Built in 2023, this b...
217 President Circle
Summerville, SC 29483
Simmons Grove
Residential
MLS# 26019594 / Active
Welcome to 217 Presidents Circle, where modern construction meets the timeless charm of Historic Summerville. Built in 2014, this beautiful home of...
2364 Primus Road
Mount Pleasant, SC 29466
Pointe At Primus
Residential
MLS# 26019592 / Active
Tucked near the back of Pointe at Primus in a cul-de-sac, this 3-bed, 3.5-bath home offers approx. 2,694 sq ft of comfortable, thoughtfully designe...
3219 Pecan Orchard Way
Charleston, SC 29414
Pierpont
Residential
Experience the perfect balance of privacy, convenience, and modern construction in this beautifully maintained 2020-built home tucked away in a pri...
936 Lansing Drive UNIT D
Mount Pleasant, SC 29464
Lansing East
Residential
MLS# 26019588 / Active
Great Location off Coleman Blvd, Walking distance to Trader Joe`s and Whole Foods, Shem Creek (0.09 mi), Pitts St. bridge, and more! This Hidden Ge...
124 White Boulevard
Summerville, SC 29483
Millwood
Residential
MLS# 26019586 / Active
Welcome to 124 White Blvd, where timeless charm meets thoughtful updates! This well-maintained 3-bedroom, 1-bath home features fresh paint througho...
133 Country Oaks Lane
Wando, SC 29492
Creekside At Beresford
Residential
MLS# 26019585 / Active
Location Location!!! Welcome to this beautifully maintained home, which is ideally located just minutes from 526, Daniel Island, and Mount Pleasant...
882 Savage Road
Charleston, SC 29414
Castlewood
Residential
MLS# 26019584 / Active
Tucked beneath mature trees in the heart of West Ashley, this thoughtfully updated home blends timeless character with modern convenience on a priv...
3508 Bagley Drive
Mount Pleasant, SC 29466
Preston At Park West
Residential
MLS# 26019582 / Active
Enjoy the resort-style lifestyle that makes Park West one of Mount Pleasant`s most sought-after communities. Just a short walk from exceptional nei...
1505 Sanborll Landing Drive
Ladson, SC 29456
Hunters Bend
Residential
MLS# 26019580 / Active
Y`all... if entertaining is your thing, you`ve found your house.From the moment you pull into this conveniently located neighborhood, you`ll notice...
4287 Hugh Bennett Drive
Johns Island, SC 29455
Sea Island Preserve
Residential
Welcome to this exquisite modern luxury home, nestled within the prestigious gated community of Sea Island Preserve. Situated on just under an acre...
1039 Friartuck Trail
Ladson, SC 29456
Hunters Bend
Residential
MLS# 26019576 / Active
MOTIVATED SELLER -- PRICED TO SELL! Welcome to 1039 Friartuck Trail, offering 2,436 sq ft living space in the highly desirable Hunters Bend communi...
1413 Spanish Moss Court
Charleston, SC 29412
Bayview Farms
Residential
MLS# 26019575 / Active
Beautifully updated throughout, this exceptional Bayview Farms home combines soaring ceilings, renovated interiors, and a private saltwater pool to...
3491 Toomer Kiln Circle
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26019573 / Active
Welcome to 3491 Toomer Kiln Circle, located in the highly desirable, well-established community of Coatbridge at Park West. Built by award-winning ...
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