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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3269 Conservancy Lane
Charleston, SC 29414
Carolina Bay
Residential
MLS# 26019508 / Active
Welcome to this beautifully maintained traditional home in the highly sought-after Carolina Bay community. Featuring an open-concept floor plan wit...
414 Bluebird Bend Street
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019507 / Active
Welcome to our new Villa Collection; introducing the Camden A! At the heart of this new almost 1,900 sq. ft. two-story home is a designated living ...
353 Dunlin Drive
Summerville, SC 29486
Nexton
Residential
MLS# 26019506 / Active
Welcome to 353 Dunlin Drive, a beautifully updated 4-bedroom, 2.5-bath home offering 2,764 square feet of thoughtfully designed living space. Fresh...
Reduced -$10,000
416 Bluebird Bend Street
Summerville, SC 29486
Carnes Crossroads
Residential
MLS# 26019504 / Active
Welcome to our new Villa Collection; introducing the Bennett-A! At the heart of this new almost 2,100 sq. ft. two-story home is a designated living...
2162 Bees Ferry Road UNIT G
Charleston, SC 29414
Dovefield
Residential
MLS# 26019502 / Active
Welcome home to 2162 Bees Ferry Road! This beautifully renovated second-floor condo overlooks the scenic Shadowmoss Golf Course and offers stylish,...
1572 Wellesley Circle
Mount Pleasant, SC 29466
Park West
Residential
MLS# 26019501 / Active
Welcome to 1572 Wellesley Circle in the highly desirable Park West community of Mount Pleasant!Step inside to discover a bright, open-concept floor...
928 Leonard Drive
Johns Island, SC 29455
Morris Acres
Residential
MLS# 26019500 / Active
***Ask about the possibility of receiving 1% reduction in interest rate and free refi.***Located on nearly half an acre in the heart of Johns Islan...
1074 Trotters Boulevard
Summerville, SC 29483
Trotters Ridge
Residential
MLS# 26019499 / Active
If you are looking for an established neighborhood in Summerville, Trotters Ridge should be on your list. Come check out this lovely home on a larg...
130 Chandler Drive
Ladson, SC 29456
Chandler Village
Residential
MLS# 26019495 / Active
Opportunity is knocking! Nestled on a quiet street with no through traffic, this 3 bedroom, 2 bath home offers nice natural light, renovated bathro...
1507 Evergreen Street
Charleston, SC 29407
Ardmore
Residential
MLS# 26019493 / Active
Rarely does a multifamily opportunity like this become available in West Ashley, 29407. This duplex with A HUGE LOT, is in good condition, and has ...
4318 Hugh Bennett Drive
Johns Island, SC 29455
Sea Island Preserve
Residential
MLS# 26019492 / Active
Welcome to 4318 Hugh Bennett Drive, a stunning Southern Traditional residence completed in 2024 that offers the rare opportunity to own an almost-n...
439 Cadbury Loop
Summerville, SC 29486
Creekside at Andrews
Residential
MLS# 26019488 / Active
Hidden in the middle of everything! Welcome home to Creekside at Andrews, where you are intimately tucked away yet the world is at your fingertips....
438 Cadbury Loop
Summerville, SC 29486
Creekside at Andrews
Residential
MLS# 26019484 / Active
Welcome home to Creekside at Andrews, where you are intimately tucked away yet the world is at your fingertips. Embrace a lifestyle away from the h...
268 Torslanda Lane
Summerville, SC 29486
Petterson Meadows
Residential
MLS# 26019483 / Active
Beautiful IN-GROUND POOL. A fantastic 5-Bedroom home. just 5 minutes from I-26 at exit 194. There`s plenty of room for family and more, including 4...
113 Tunnel Road
Summerville, SC 29483
Residential
MLS# 26019478 / Active
SOUTHERN COMFORT AND COUNTRY LIVING at its finest!! Just minutes from the hustle bustle of big neighborhoods, this pleasant county oasis with over ...
7624 Indigo Palms Way
Johns Island, SC 29455
Indigo Hall At Hope Plantation
Residential
Resale unit. Lightly used as a second home and impeccably maintained, this move-in ready residence is offered fully furnished--including the washer...
2401 Falcon Road
North Charleston, SC 29406
Wildwood
Residential
MLS# 26019472 / Active
A full 2022 renovation, a big fenced yard, and a commute you can actually live with. This single-story 3-bedroom, 1-bath home in North Charleston p...
890 W Madison Avenue
Charleston, SC 29412
Centerville
Residential
MLS# 26019471 / Active
Located in one of James Island`s most desirable neighborhoods, this beautiful 5-bedroom, 4-bathroom home is just 8 minutes to Downtown Charleston a...
115 Pebble Creek Road
Summerville, SC 29486
Sangaree
Residential
MLS# 26019470 / Active
Welcome to this charming 2-bedroom, 2-bath home in the established Sangaree community, offering comfortable one-level living in an unbeatable locat...
229 N Shelmore Boulevard
Mount Pleasant, SC 29464
Ion
Residential
MLS# 26019469 / Active
Welcome to 229 N. Shelmore Boulevard, a rare I`On gem under $2 million that has been remodeled top to bottom. This lovely four-bedroom home has jus...
Lot D-2 Hwy 165
Ravenel, SC 29470
Residential
MLS# 26019468 / Active
PROPOSED CONSTRUCTION on a 2+ acre, no HOA lot, only minutes from I-26, Summerville and all things Charleston! $20,000 builder incentive to spend o...
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