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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177 Winding Rock Road
Goose Creek, SC 29445
Crowfield Plantation
Residential
MLS# 26016704 / Active
Welcome to 177 Winding Rock Rd. in sought-after Crowfield Plantation`s Piedmonte Place subsection. This beautifully updated 4-bedroom, 2.5-bath hom...
116 Sparrow Street
Bonneau, SC 29431
Lake Moultrie Shores
Residential
MLS# 26016702 / Active
``Boat from your backyard to Lake Moultrie!``Welcome to 116 Sparrow Street, where waterfront living meets small-town Southern charm! Nestled along ...
110 Bee Street
Summerville, SC 29483
Flowertown
Residential
MLS# 26016698 / Active
Opportunity is Knocking!Whether you`re a first-time homebuyer seeking the privacy and freedom of single-family living, an investor searching for a ...
1351 Winterberry Avenue
Goose Creek, SC 29445
St. James Estataes IV
Residential
MLS# 26016696 / Active
Welcome to this spacious custom-built home in the desirable St. James Estates community! Offering approximately 2,360 square feet, this home featur...
2678 Egrets Landing Court
Mount Pleasant, SC 29466
Brickyard Plantation
Residential
MLS# 26016694 / Active
Magnificent waterfront estate on 2.26 acres in Brickyard Plantation, where sunsets over Horlbeck Creek become a nightly ritual from your private de...
2049 Syreford Court
Charleston, SC 29414
Hunt Club
Residential
MLS# 26016691 / Active
Much larger than it appears! This deceptively spacious home combines the ease of main-level living with the flexibility of a second floor. Inside, ...
184 Whaler Avenue
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26016688 / Active
Welcome to 184 Whaler Avenue in the desirable West Lake community! Enjoy resort-style amenities, miles of walking and golf cart trails, and a conve...
334 Shoptaw Road
Holly Hill, SC 29059
Residential
MLS# 26016684 / Active
Traditional custom-built 4-bedroom, 2.5-bath home situated on 14.2 acres of mature forest along Briner Branch. This beautifully maintained property...
50 Elmwood Place
Goose Creek, SC 29445
Holly Court
Residential
MLS# 26016683 / Active
Charming 3-Bedroom Brick Home !Welcome home to this well-maintained 3-bedroom, 1.5-bath brick ranch nestled on a peaceful cul-de-sac. Inside, you`l...
Reduced -$10,000
1224 Old Course Lane
Mount Pleasant, SC 29466
Charleston National
Residential
MLS# 26016678 / Active
Tucked into the established Charleston National community, this 4-bedroom, 2.5-bath home offers the kind of outdoor living that makes Mount Pleasan...
301 Black Birch Drive
Summerville, SC 29486
Cane Bay Plantation
Residential
MLS# 26016676 / Active
Move-in ready Robie model built in 2022 in the Pine Hills community of Cane Bay Plantation. Situated on an oversized corner homesite with privacy f...
490 Eagleview Drive
Moncks Corner, SC 29461
Foxbank Plantation
Residential
MLS# 26016672 / Active
Better than new and move-in ready!Welcome to 490 Eagleview Drive, a beautifully maintained home in the highly sought-after Foxbank Plantation commu...
Reduced -$5,001
336 Coinbow Drive
Mount Pleasant, SC 29464
Hobcaw Point
Residential
MLS# 26016670 / Active
Situated on more than an acre in the coveted Hobcaw Point community, and just minutes from downtown Charleston, this exceptional custom residence o...
2608 Bayonne Street
Sullivans Island, SC 29482
Residential
MLS# 26016668 / Active
Nestled just steps from the Atlantic Ocean, this exceptional second-row contemporary residence seamlessly blends modern luxury with effortless coas...
1304 Pelican Watch Villas UNIT #1304
Seabrook Island, SC 29455
Seabrook Island
Residential
MLS# 26016663 / Active
Investment & Lifestyle Opportunity. Start and end everyday to panoramic ocean-river views, unforgettable sunsets, and a private boardwalk to your o...
9127 Parlor Drive
Ladson, SC 29456
Tranquil Hill Plantation
Residential
Some end units are just end units. This one is different. 9127 Parlor Drive sits on perhaps the BEST lot in all of Tranquil Hill Plantation: lush g...
3021 Robeson Trace
Johns Island, SC 29455
Indigo Grove
Residential
MLS# 26016648 / Active
This brand-new Stanley Martin home is on a gorgeous lot backing to woods with a large wrap around porch to take in the views! NEED A LARGE GARAGE??...
4764 Holbird Street
North Charleston, SC 29405
Wando Woods
Residential
MLS# 26016643 / Active
1984 brick ranch is located in the central Charleston area neighborhood of Wando Woods and offers abundant garage space. At 1617sqft, this home has...
125 Crooked Creek Court
Summerville, SC 29486
Sangaree
Residential
MLS# 26016641 / Active
Welcome to 125 Crooked Creek Court! This charming 3 bedroom, 2 bathroom home is nestled on a cul-de-sac in the Sangaree neighborhood, conveniently ...
2848 Cavalcade Circle
Johns Island, SC 29455
River Glen
Residential
MLS# 26016640 / Active
Rare opportunity to own River Glen`s largest home! A stunning 4,302 sq ft retreat on a premium private wooded lot. This 5BR/4BA gem is move-in read...
411 Talbot Drive
Summerville, SC 29486
Nexton
Residential
MLS# 26016636 / Active
*$4.99 FIXED RATE & $10K IN CLOSING COST ASSISTANCE! Certain terms apply* Welcome to your dream home by Stanley Martin in the heart of Nexton, SC! ...
Reduced -$4,562
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