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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206 Laurelhurst Lane
Johns Island, SC 29455
Rhetts Cove
Residential
MLS# 26017845 / Active
Estimated Delivery In December! The Jenkins at Rhetts Cove offers 1,957 square feet of flexible living space with 3 bedrooms, 2 full 2 half baths, ...
4886 State Road
Ridgeville, SC 29472
Residential
MLS# 26017843 / Active
Looking for your own slice of heaven in the Lowcountry? Look no further! This three acre wooded parcel offers a lovely place to call home, sheds fo...
972 Equestrian Drive
Mount Pleasant, SC 29464
Hermitage
Residential
MLS# 26017842 / Active
From the moment you arrive at 972 Equestrian Drive, the curb appeal makes quite an impression. This charming home welcomes you with a wide and invi...
10 Dune Ridge Lane
Isle of Palms, SC 29451
Wild Dunes
Residential
MLS# 26017835 / Active
Nestled beneath a canopy of majestic live oaks on one of Wild Dunes Resort`s most coveted cul-de-sacs, 10 Dune Ridge Lane offers an exceptional ble...
125 Berry Shoals Drive
Summerville, SC 29485
Windward Village
Residential
MLS# 26017833 / Active
A delightful new townhome-home style condos sitting back in the corner of the neighborhood backed by woods awaits. Luxury awaits with a beautifully...
337 Hillman Trail Drive
Moncks Corner, SC 29461
Foxbank Plantation
Residential
MLS# 26017828 / Active
Welcome to 337 Hillman Trail Drive in sought-after Foxbank Plantation! Less than one year old and meticulously maintained, this beautiful Hardie Pl...
3633 Clambank Drive
Mount Pleasant, SC 29466
Carolina Park
Residential
MLS# 26017827 / Active
Nestled in the prestigious, premier home community of Riverside in Carolina Park, this luxury 2022 build is a Lowcountry dream home offering over 4...
64 Clemson Street
Charleston, SC 29403
Wagener Terrace
Residential
MLS# 26017823 / Active
A special spot of Charleston. Quiet and quaint, with easy access in and out of downtown. Beautifully landscaped and welcoming, this Charleston cott...
545 Towles Crossing Drive
Johns Island, SC 29455
Opti Isle
Residential
MLS# 26017821 / Active
Welcome to Kingfisher Island, where life revolves around the water. This exceptional new construction home on scenic Rantowles Creek offers a rare ...
1108 Grove Park
Charleston, SC 29414
Grand Oaks Plantation
Residential
MLS# 26017819 / Active
Tucked at the back of Grove Park, this second-floor condo provides privacy, a tranquil pond view, and modern finishes throughout. Features include ...
3333 Stockdale Street
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26017816 / Active
Welcome to 3333 Stockdale Street, where classic Southern charm meets the unmatched convenience and lifestyle of Park West.Framed by a picturesque w...
8650 Sentry Circle
North Charleston, SC 29420
Indigo Palms
Residential
MLS# 26017814 / Active
Welcome to 8650 Sentry Circle, a move-in ready home in the sought-after Indigo Palms community, zoned for the highly rated Dorchester District Two ...
489 Antebellum Lane
Mount Pleasant, SC 29464
Belle Hall
Residential
MLS# 26017811 / Active
Looking for a Belle Hall home that can easily flex to fit your family`s life now and for years to come? The floorplan of this well-maintained home ...
319 Flyway Road
Goose Creek, SC 29445
Liberty Hall Plantation
Residential
MLS# 26017808 / Active
Check out this meticulously maintained 4 bedroom END UNIT townhome that is move in ready. This home has been tastefully updated and decorated with ...
Reduced -$10,999
130 Hidden Hills Road
Cross, SC 29436
Loyal Acres
Residential
MLS# 26017806 / Active
Welcome to Loyal Acres - Where Space, Privacy & Possibility Meet! Tucked away on almost an acre in Cross, SC, this one-of-a-kind property offers th...
3974 Gullah Avenue
North Charleston, SC 29405
Horizon Village
Residential
MLS# 26017804 / Active
Welcome to 3974 Gullah Avenue in North Charleston!Situated in a fantastic location near the vibrant Park Circle area, Old North Charleston, and the...
Reduced -$25,001
63 Kennedy Street
Charleston, SC 29403
City Of Charleston
Residential
MLS# 26017803 / Active
Experience modern Charleston living in this newly constructed four-bedroom home on Kennedy Street. Thoughtfully designed with an open, airy floor p...
3635 Pandora Drive
Mount Pleasant, SC 29466
Copahee View
Residential
MLS# 26017800 / Active
Absolutely stunning, custom-built Low Country home is ready for your `Today` and `Tomorrows!` With a .46-acre treed lot, the Owners created a park-...
2721 Harmony Lake Drive
Johns Island, SC 29455
Woodbury Park
Residential
MLS# 26017797 / Active
There`s a particular kind of quiet that settles over a lakefront morning on Johns Island. The soft call of birds, the shimmer of first light on the...
1645 Dexter Lane
Charleston, SC 29412
Meridian Place
Residential
MLS# 26017794 / Active
Beautiful single story, 2 bedroom 2 bathroom townhome available in one of James Island`s most conveniently located neighborhoods-Meridian Place! 16...
333 Tupelo Lake Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26017793 / Active
Welcome to the fabulous lake view home in Four Seasons retirement community in Cane Bay Subdivision. This home has a wonderful open floor plan with...
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