There is an article on the IRS website you should read if you are considering a foreclosure. This article outlines what is “cancellation of debt” income. It describes the circumstances whereas there may be NO tax liability on your part. It describes what is a “non recourse loan” and its ramifications on your tax liability. It also offers a worksheet on figuring your possible tax liability and/or gain in a foreclosure. It also outlines what you may see on a 1099 form you may receive from your lender after a foreclosure. There is also a FREE service available to you thru the Taxpayer Advocate Service. You can also call the Taxpayer Advocate office toll-free 1-877-777-4778, TTY/TDD 1-800-829-4059.
Please note:
You need expert advice from a short sale expert, foreclosure attorney and/or accountant when contemplating either of your options when behind in your mortgage. Each option; short sale, foreclosure, deed in lieu, etc. all have their own pros, cons and possible tax and financial implications for you and you must seek expert advice to weigh the advantages of either option for you individually. No two cases are alike. REALTORS are not attorneys or tax experts, though we can offer you referrals to local tax or legal specialists.
Catherine Myers
Terry Osburn
Find your local short sale expert serving Walnut Creek, Concord, Clayton, Pleasant Hill, Martinez, Lafayette, Antioch, Bay Point, Pittsburg and surrounding Contra Costa County areas. Get a referral for a mortgage expert, tax advice and legal questions.
