Are There Tax Implications On A Short Sale?

Do I Have To Pay Taxes On A Short Sale?

Many people wonder if they have to pay taxes on the amount of debt forgiven on a short sale.  The simple answer to the question is Possibly.  Typically, the lender will issue a 1099-C which outlines the amount of debt forgiven during the short sale process.  Depending on your personal situation, you may have to report this as income on your tax return.  There are certain situations where you will not have to report this forgiven debt as income from the short sale.  For example, if you meet the IRS' definition on Insolvency, you would not have to report the forgiven debt as income.

It is important to note that you should discuss your situation with your CPA or tax adviser to find out if you need to report the deficiency as income when you file your taxes.

Please Contact Us today to answer any other questions regarding selling your home on a short sale.