What are the tax considerations of a HAFA short sale or deed-in-lieu?

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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. more
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