Understanding the Possible Tax Consequences of Filing a Short Sale
Hello this is Shawn Polston of Tucson short sale and Keller Williams Southern Arizona and I’m hear to talk to you today about one of the most common questions I receive. One of the first questions I get is, ‘will there be tax consequences if I do a short sale?" When a short sale is done you receive a 1099-C tax form, which represents a cancelation of debt. If a homeowner just walks away or forecloses on their property they will receive a 1099-A, which represents an abandonment of a secure property. In most cases a 1099-A will end up costing you ten to forty percent more than by filing a short sale and receiving a 1099-C. Therefore the amount of loss shown on a 1099-A will be much higher. Most homeowners also are not aware of the Mortgage Debt Forgiveness Act of 2007 which runs until the end of 2012. This act is in place to give tax relief to a homeowner after finishing a short sale. In order to qualify the property must be your primary residence and the debt forgiveness needs to be less than $2 million dollars. Most property owners fall under these two basic guidelines which is why a short sale can be much more beneficial for your tax record. When considering your tax questions when moving a distressed property it is also a good idea to speak with a tax professional who will have a better understanding of your specific situation. I look forward to answering any other questions you have about the short sale process and helping you move on from your distressed property. Thank you and have a great day.
