Tax Consequences of a Short Sale

Tax consequences of a Short Sale - This question keeps coming up with home sellers inquiring about Atlanta short sales and the tax ramifications. There seems to be lots of misinformation floating around. While I am not a CPA, I looked this up after I heard that an accountant gave out information contrary to what we can read in simple English on www.IRS.gov.

If your mortgage debt is partially or completely forgiven (for example a short sale or foreclosure) during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Instead of receiving a 1099 from your lender which shows taxable income, there will be a 1099-C. The C is for cancellation.

The home must be your primary residence. Investment property doesn't count. The forgiven debt on an investment property can still be taxable income.

Believe it or not, the IRS has broken it down into something that isn't hard to interpret. See more information from IRS.gov on the Debt Forgiveness Act of 2007. It's a quick easy read.

If you are behind on your mortgage payments, know that there are options. A short sale is one of them. Please don't wait until the bank has set a foreclosure date to contact an agent that specializes in short sales.

If you have a home to sell in the metro Atlanta area, please feel free to contact me with your short sale questions. If I don't know the answer, we have a team of attorneys that do know.

Jen Bowman, Broker Associate, Certified Distressed Property Expert at Keller Williams Realty Atlanta Partners 404-456-5024.

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