What are the tax considerations of a HAFA short sale or deed-in-lieu?
The difference between the remaining amount of principal owed and the amount that the servicer receives from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. The $3,000 Borrower Relocation Assistance may also be reported as income.23 A short sale may have income tax consequences and/or may have a derogatory impact on your credit score.24 Homeowners should contact the IRS or their tax preparer to determine if they may have any tax liability.
- I would like to pursue a HAFA Deed-in-Lieu instead of a HAFA Short Sale. Why do I need to market and attempt to sell my home through a HAFA Short Sale first?
- What are the tax implications of a short sale, foreclosure, and deed in lieu of foreclosure?
- What are the tax ramifications to the homeowner for a Short Sale?