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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1129 Armstrong Avenue
Charleston, SC 29407
Maryville
Residential
MLS# 26017893 / Active
Situated on a spacious double lot at the end of a quiet dead-end street in the heart of West Ashley, this beautifully maintained home is just a sho...
Reduced -$10,000
556 Pine Street
Holly Hill, SC 29059
Residential
MLS# 26017892 / Active
Ready August 2026- New Home in Holly Hill! Welcome home to this beautifully crafted 3-bedroom, 2-bathroom ranch-style home with garage offering the...
167 Winter Drive
Cottageville, SC 29435
Residential
MLS# 26017891 / Active
Where country living meets comfort and privacy! This home offers the peaceful lifestyle you`ve been dreaming of. Bring your chickens, your dogs, an...
514 Mansfield Street
Charleston, SC 29407
Edgewood Gardens
Residential
MLS# 26017890 / Active
Welcome to 514 Mansfield Street, a beautifully renovated home on a desirable corner lot in West Ashley. This move-in-ready property offers modern u...
302 Hydrangea Street
Summerville, SC 29483
White Gables
Residential
MLS# 26017889 / Active
ASSUMABLE 3.875% INTEREST RATE. Assumable rate is available to anyone.First-Floor Owner`s Suite, Loft, Fenced Yard, Great Amenities, and DD2 School...
350 Trailmore Lane
Summerville, SC 29486
Nexton
Residential
MLS# 26017887 / Active
Agent Owner-$60,000 in upgrades added! This breathtaking home awaits you in Nexton, Midtown, one of Summerville`s most sought-after neighborhoods. ...
306 Citation Way
Moncks Corner, SC 29461
The Paddock At Fairmont South
Residential
MLS# 26017886 / Active
Ask about the possibility of receiving 1% reduction in interest rate and free refi.***Welcome to this immaculate, move in ready home in The Paddock...
1237 Peregrine Drive UNIT #4
Charleston, SC 29412
Peregrine Point
Residential
MLS# 26017885 / Active
Nestled beneath a canopy of moss-draped grand oaks, where the land gently surrenders to the winding waterways of the Lowcountry, lies this hidden g...
146 Spencer Circle
Summerville, SC 29485
Shady Oaks
Residential
MLS# 26017884 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.***Welcome to this charming townhouse nestled on a desirable ...
7 Garden Corner Court
Charleston, SC 29407
Farmfield
Residential
MLS# 26017882 / Active
Tucked beneath a canopy of magnificent live oaks in Charleston`s beloved Farmfield neighborhood, 7 Gardens Corner is a home where the beauty of the...
2063 Long Bend Drive
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 26017881 / Active
Welcome to 2063 Long Bend Drive, a beautifully renovated, well-maintained and fully furnished villa on Seabrook Island that blends easy living with...
2646 Ranger Drive
North Charleston, SC 29405
Waylyn
Residential
MLS# 26017880 / Active
Discover the potential in this inviting 3-bedroom, 2-bath home nestled within a well-established community full of character and convenience. Wheth...
1335 Old Colony Road
Mount Pleasant, SC 29464
Heritage
Residential
MLS# 26017879 / Active
Framed by a majestic Live Oak tree and featuring a spacious, newly fenced backyard, this beautifully maintained three-bedroom, three-bath ranch-sty...
1810 Wedgefield Road
Charleston, SC 29407
West Ashley Plantation
Residential
MLS# 26017876 / Active
Wow! What a gem! This adorable home has had a facelift and you`re going to love it! And, it`s in the ORANGE GROVE ELEMENTARY attendance zone!! Hard...
35 Society Street UNIT E
Charleston, SC 29401
Residential
MLS# 26017875 / Active
Located in the heart of Charleston`s historic Ansonborough neighborhood, this exceptional 2 bedroom, 2 full bath residence offers a rare opportunit...
Reduced -$50,000
3012 Sugarberry Lane
Johns Island, SC 29455
Whitney Lake
Residential
MLS# 26017873 / Active
Welcome to 3012 Sugarberry Lane in Whitney Lake! You will not only be purchasing a delightful home, but you will also be a part of a fabulous commu...
380 Calm Water Way
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26017872 / Active
The desirable Conway floor plan offers spacious living with an upstairs loft ideal for a home office, playroom, or media space. The main level cent...
Reduced -$3,000
2912 Eddy Drive
Mount Pleasant, SC 29466
Dunes West
Residential
MLS# 26017869 / Active
Lowcountry Living at its Finest-Inside the Gates of Dunes West! Discover this beautifully designed home in the highly sought-after Dunes West Golf ...
2753 Jobee Drive UNIT Unit 1003
Charleston, SC 29414
Ashleytowne Village
Residential
MLS# 26017868 / Active
Welcome to Ashleytowne Village! This well-maintained 3-bedroom, 2-bath condo offers comfortable living in a convenient West Ashley location. The en...
407 Painted Lady Lane
Goose Creek, SC 29445
Landings At Montague
Residential
MLS# 26017864 / Active
Corner Location currently under construction! Home will be ready end of August/September The Chatham plan is one of just 2 remaining available in t...
2032 Groveland Avenue
North Charleston, SC 29405
Union Heights
Residential
MLS# 26017858 / Active
INVESTOR SPECIAL!! Seize the opportunity to transform this 1942- built home located in established Union Heights community of North Charleston. Sit...
Reduced -$20,000
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