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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216 Shepard Street
Summerville, SC 29483
Shepard Park
Residential
MLS# 26016997 / Active
Rare opportunity to own a private NO HOA home minutes from historic downtown Summerville. Designed for comfortable living and entertaining, this 4-...
1347 Sea Aire Drive
Charleston, SC 29412
Residential
MLS# 26016996 / Active
Brand new construction on James Island with no HOA! Estimated completion August 2026. Built on a 16-inch raised monoslab foundation, this thoughtfu...
1351 Sea Aire Drive
Charleston, SC 29412
Residential
MLS# 26016993 / Active
Brand new construction on James Island with no HOA! Estimated Completion August 2026. Enjoy one-story living, plus an oversized FROG with a full ba...
2154 Saint James Drive
Charleston, SC 29412
Riverland Terrace
Residential
MLS# 26016992 / Active
One of the last remaining original 1930s farmhouses in Riverland Terrace -- a Charleston treasure that cannot be replicated! Set along the oak-line...
7677 Eagle Lake Road
North Charleston, SC 29418
Brookdale
Residential
MLS# 26016985 / Active
Lovely home, great location close to CAFB. Open floor plan with 3 bedrooms and an additional room (FROG). Vaulted Ceiling with large eat-in kitchen...
Reduced -$5,000
562 Fort Johnson Road
Charleston, SC 29412
Eastwood
Residential
MLS# 26016984 / Active
Welcome to this sprawling private two-thirds of an acre sanctuary in the coveted Eastwood subdivision on James Island. A picturesque canopy of oaks...
Reduced -$20,000
774 Blueway Avenue
Summerville, SC 29486
Nexton
Residential
MLS# 26016983 / Active
The highly sought-after Laurel floorplan is a true crowd favorite, offering the perfect blend of style, comfort, and functionality. Featuring a spa...
8867 Salamander Road UNIT #56
North Charleston, SC 29406
Pinckney Place
Residential
MLS# 26016982 / Active
ALL APPLIANCES INCLUDED! Ask about our Down Payment Assistance Program! Welcome home to The Ross, a well-designed 3-bedroom, 2.5-bath home offering...
440 Thoroughbred Drive
Moncks Corner, SC 29461
Steeplechase
Residential
MLS# 26016978 / Active
Welcome home to 440 Thoroughbred Dr, a beautifully maintained home in the Steeplechase community, offering a blend of comfort, space, and modern co...
113 Long Cove Bend
Summerville, SC 29483
Pine Forest Country Club
Residential
MLS# 26016976 / Active
Welcome to this stunning 5-bedroom, 3-bath home nestled on a private cul-de-sac lot in the highly sought-after Pine Forest Country Club community. ...
1984 Folly Road UNIT B302
Charleston, SC 29412
Pelican Pointe Villas
Residential
MLS# 26016975 / Active
Life`s a Beach! Experience coastal living at its finest in this beautifully updated 2-bedroom, 2-bathroom third-floor condo featuring breathtaking ...
2937 Oxford Place
Charleston, SC 29414
Shadowmoss
Residential
MLS# 26016974 / Active
This 1,415-square-foot townhome offers comfortable living, thoughtful upgrades, and a highly desirable West Ashley location for under $300,000.This...
133c Howard Mary Drive UNIT 133c
Charleston, SC 29412
Sable On The Marsh
Residential
MLS# 26016972 / Active
This stunning end-unit townhouse near Folly Beach perfectly blends coastal luxury with everyday functionality. The main floor greets you w/dramatic...
170 Madison
Walterboro, SC 29488
Residential
MLS# 26016970 / Active
Great first time buyer 203k Loan or investor project! This brick approx. 1391 sq.ft. house has originally 4 bedrooms but has been since converted t...
914 Lakeview Drive
Mount Pleasant, SC 29464
The Groves
Residential
MLS# 26016968 / Active
Welcome to 914 Lakeview Drive, a stunning new construction custom home situated on an expansive half-acre (.53) lot in the heart of the Groves, one...
109 Marions Oak Drive
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26016963 / Active
Welcome to one of the most sought after floorplans in Carnes Crossroads-- the Tradd. Thoughtfully designed and better than new construction, this 4...
4432 Palm Shadow Drive
Summerville, SC 29485
Watson Hill
Residential
MLS# 26016961 / Active
One of the first things you`ll notice about 4432 Palm Shadow Dr is the lot. Set on a spacious, wooded homesite, it offers a level of privacy you ca...
Reduced -$5,000
428 Avocet Drive
Summerville, SC 29486
Nexton
Residential
MLS# 26016950 / Active
No carpet! New flooring. EV Charger. This house lives large! Corner lot for bigger yard, 2 gathering areas, big laundry room, generously sized bedr...
Reduced -$10,000
4808 Wilson Road
Meggett, SC 29449
Meggett
Residential
MLS# 26016948 / Active
NO HOA!! BRING THE BOAT, RV, ATV -- EVEN THE GOATS! Welcome to modern Lowcountry living on 2 peaceful acres in Meggett, where space, privacy, and f...
360 W Smith Street
Summerville, SC 29485
Residential
MLS# 26016944 / Active
Tucked away on 4.04 private acres, this charming 4-bedroom home offers the rare combination of seclusion & convenience with no HOA! Inside you`ll f...
Reduced -$10,000
45 Sycamore Avenue UNIT #1434
Charleston, SC 29407
Concord West Of The Ashley
Residential
MLS# 26016938 / Active
Welcome to Concord West of Ashley, a gated community offering comfort, convenience, and a variety of amenities! This third-floor condo features 1 b...
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