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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2528 Josiah Street
Charleston, SC 29492
Daniel Island
Residential
MLS# 26019540 / Active
Looking for a special home on Daniel Island? Rarely available, meticulously maintained, this charming one-story DI Southside jewel box is ideally l...
5276 7th Green Drive
Hollywood, SC 29449
Stono Ferry
Residential
MLS# 26019539 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.***Beautifully positioned in the Ironwood section of The Plan...
221 Mullins Bay Court
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019537 / Active
The beautiful Ashley is a Charleston Single style home with amazing double balconies. Inside you will find a spacious foyer and flex room that woul...
173 Sea Oats Street
Summerville, SC 29485
Summers Corner
Residential
MLS# 26019536 / Active
*Est Completion Oct 2026* The Calhoun Plan-This detached garage, Charleston Style home, features a first floor owners suite, large loft and double ...
1990 Kay Street
Johns Island, SC 29455
Cedar Springs
Residential
MLS# 26019535 / Active
Welcome to 1990 Kay Street! Built in 2018, this beautifully maintained 3-bedroom, 2-bath home offers modern Lowcountry living on a spacious 0.35-ac...
324 Brightside Trail
Summerville, SC 29486
Nexton
Residential
MLS# 26019534 / Active
Welcome to Homesite 1783, a beautifully designed Tradd home plan by DRB Homes in the highly desirable Midtown Nexton community. Estimated for compl...
3105 Grass Marsh Drive
Mount Pleasant, SC 29466
Dunes West
Residential
Nestled on a quiet, wooded homesite in the highly sought-after gated community of Dunes West, this beautifully maintained residence offers timeless...
6615 Old Jacksonboro Road
Ravenel, SC 29470
Residential
MLS# 26019530 / Active
Discover the ultimate private sanctuary, multi-generational retreat, or premier equestrian estate. Situated just under 30 minutes from historic dow...
320 Long Pier Street
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26019528 / Active
SUBJECT TO LENDER APPROVALThis incredible 6-bedroom, 4-bath home listed UNDER MARKET VALUE offers over 4,000 square feet of open, airy and truly ma...
1026 Adirondack Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 26019527 / Active
The Foxtail Plan - This 5 bedroom, 3.5 bath home features the owners suite on the first floor, large loft and covered porch. All main living areas ...
1037 Red Turnstone Run
Summerville, SC 29485
Summers Corner
Residential
MLS# 26019526 / Active
The Foxtail Plan - This 5 bedroom, 3.5 bath home features the owners suite on the first floor, large loft and covered porch. All main living areas ...
1722 Waterbrook Drive
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26019525 / Active
Welcome to this beautifully maintained 4-bedroom, 2.5-bath home in the highly sought-after Cypress section of Carolina Bay. Situated on one of the ...
9004 Hema Lane
Summerville, SC 29483
Myers Mill
Residential
MLS# 26019524 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.*** With a spacious floor plan, thoughtful updates, and a con...
128 Midmills Lane
Summerville, SC 29486
Sheep Island
Residential
MLS# 26019522 / Active
The Tillman | 5 Bedrooms, Loft & Conservation Views Just Minutes from NextonWelcome to 128 Midmills Lane, a stunning new construction home in the s...
1004 Tea Time Drive
Summerville, SC 29485
Summers Corner
Residential
MLS# 26019521 / Active
The Sweetgrass is a great four bedroom home with loft and covered, back porch. Estimated for May move-in. Two story foyer, LVP flooring throughout ...
7747 Ovaldale Drive
North Charleston, SC 29418
Forest Hills
Residential
MLS# 26019519 / Active
Completely renovated from top to bottom, this move-in ready 4-bedroom, 2-bath brick ranch offers stylish updates, functional living, and the ease o...
101 Duck Pond Court
Summerville, SC 29485
Legend Oaks Plantation
Residential
MLS# 26019518 / Active
Located in the desirable Legend Oaks Plantation, this beautiful home offers space, comfort, and an ideal layout for modern living. Situated on a co...
149 Beamon Loop
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019514 / Active
Welcome to the Kingston! This new two-story home exudes elegance from the moment of entry. A formal dining room greets guests at the front, followe...
305 Forest Circle
Walterboro, SC 29488
Forest Hills
Residential
MLS# 26019511 / Active
Nestled beneath mature pine trees, this inviting 3BR/2BA brick ranch blends classic character with thoughtful updates. A cheerful teal door welcome...
223 Waterfront Park Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26019510 / Active
Welcome to 223 Waterfront Park, where resort-style living meets the comfort of home in the highly sought-after Del Webb at Cane Bay, one of the Low...
324 Trailmore Lane
Summerville, SC 29486
Nexton
Residential
MLS# 26019509 / Active
Move right into this beautifully designed home that offers the perfect blend of convenience, comfort, and flexibility. Ideal for a lock-and-leave l...
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