What effect does a home foreclosure or short sale have on your taxes?
If your home was foreclosed or you had a short sale this year, you need to report this on your tax return – the amount of debt forgiven by the loan holder is considered income.
For tax years prior to 2017, forgiven debt from a foreclosure or short sale of your primary residence is exempt from taxes. Beginning January 1, 2018, the amount of income forgiven at foreclosure or a short sale may be taxable. Your lender should send you Form 1099-C when your home is foreclosed upon – this form will have the information you need to determine your taxable amount.
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