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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18 Carson Drive
Charleston, SC 29407
Lenevar
Residential
MLS# 26018137 / Active
One of West Ashley`s most beloved neighborhoods, Lenevar is known for its mature trees, larger lots, walkable streets, and strong sense of communit...
1130 San Juan Avenue
Charleston, SC 29407
Kingsland
Residential
MLS# 26018135 / Active
Welcome to 1130 San Juan Ave, Charleston--a beautifully renovated 1,560-square-foot home in the highly desirable West Ashley area, just 5 minutes f...
Reduced -$10,000
1044 Lettered Olive Lane
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018134 / Active
The Henninger Plan- This first-floor owners floor plan features an open den, LVP in all main living areas of the first floor and massive kitchen co...
Reduced -$10,250
227 N Light Way
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26018131 / Active
Stunning Upgraded Luxury on a Premium Pond Lot - The Glenwood Floor Plan Welcome to single-story luxury. This immaculate 3-bed, 2-bath open floor p...
Reduced -$5,000
1040 Lettered Olive Way
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018129 / Active
The Hanover Plan- This 4 bedroom, 2.5 bath home features a downstairs study with glass double doors, luxury vinyl plank flooring on all main living...
Reduced -$10,750
1413 Glencoe Drive
Mount Pleasant, SC 29464
Old Mt Pleasant
Residential
Nestled in the heart of Old Mount Pleasant, 1413 Glencoe Drive offers the rare combination of a coveted location, modern updates, and the freedom o...
1041 Red Turnstone Run
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018126 / Active
The Foxtail Plan - This 5 bedroom, 3.5 bath home features the owner`s suite on the first floor, large loft and covered porch. All main living areas...
1010 Tea Time Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018123 / Active
The Primrose, like our popular new model home in Heron`s Walk! Upon entry, you will be greeted with a spacious entry hall. The open layout offers a...
Increase +$3,100
2322 Chatelain Way
Mount Pleasant, SC 29464
Southampton Pointe
Residential
MLS# 26018122 / Active
Set in Southampton Pointe, a gated community in Mount Pleasant, SC (29464), 2322 Chatelain Way is a second-floor condo offering 767 square feet of ...
5717 San Flora Avenue
Ravenel, SC 29470
Palmetto Terrace
Residential
MLS# 26018120 / Active
This charming home, located just 20 minutes from Downtown Charleston, has been meticulously cared for and thoughtfully updated. From the moment you...
8021 Caswell Court
Ladson, SC 29456
Elms Glen
Residential
MLS# 26018119 / Active
SEPT. DELIVERY! *$10,000 TOWARDS CLOSING COST and or RATE BUY DOWN w/ use of pref. lender and attorney!! *. Welcome to Elms Glen...the latest new c...
1359 Locals Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 26018117 / Active
Welcome to 1359 Locals Street, located in a sought-after 55+ active adult community designed for comfort, convenience, and an engaging lifestyle. T...
8708 Alexandria Drive
North Charleston, SC 29420
Cedar Grove
Residential
MLS# 26018116 / Active
Welcome to 8708 Alexandria Drive, where timeless all-brick construction, thoughtful design, and a private wooded setting come together in one of No...
757 Longfellow Road
Charleston, SC 29407
East Oak Forest
Residential
MLS# 26018115 / Active
Conveniently located less than three miles from downtown Charleston and only a short distance from Avondale, this charming ranch-style home offers ...
Reduced -$20,000
1067 Loyalist Lane
Mount Pleasant, SC 29464
Snee Farm
Residential
MLS# 26018113 / Active
Located in the sought-after New Charlestowne section of Snee Farm, 1067 Loyalist Lane offers classic Lowcountry style and a view that feels straigh...
222 Fiddie Street
Ladson, SC 29485
Residential
MLS# 26018112 / Active
Property sits in Summerville, a rare find of acreage! the home needs a little TLC and has a mancave, as well as storage. Partially fenced in and pa...
1236 Carriage Wood Circle
Ridgeville, SC 29472
Residential
MLS# 26018105 / Active
JUST RELEASED - Grand Opening at Crossing at Givhans by Starlight Homes! Be among the first to secure the best homesites and take advantage of limi...
1229 Carriage Wood Circle
Ridgeville, SC 29472
Ridgeville
Residential
MLS# 26018104 / Active
JUST RELEASED - Grand Opening at Crossing at Givhans by Starlight Homes! Be among the first to secure the best homesites and take advantage of limi...
88 Blue Jasmine Lane
Summerville, SC 29483
Scotts Mill
Residential
MLS# 26018100 / Active
Unlock unmatched equity and ultimate peace of mind with the absolute best value, lowest-priced turnkey opportunity in the entire neighborhood! Phot...
427 Dogwood Circle
Summerville, SC 29485
Twin Oaks
Residential
MLS# 26018097 / Active
Twin Oaks is an older and well-settled neighborhood that is convenient to all points of interest and necessity. Tree lined and shaded streets meand...
112 Cartright Street
Charleston, SC 29492
Daniel Island
Residential
MLS# 26018094 / Active
Welcome to 112 Cartright St. a charming 3-bed, 2.5-bath home in the heart of Daniel Island`s Southside. A welcoming foyer opens to a cozy living ro...
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