who here has had a foreclosure and can tell me about the aftermath with taxes....my main question is about the exclusions.....are there any circumstances where i wont have to pay the difference in taxes as income on a 1099? i heard if i have own/ live in the home for the last 5 years, i will not have to pay on that? is this correct?
2007-10-06 19:09:17 · 3 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
1. Cancellation of debt income is not taxable in the case of non-recourse loans. But it may result in reportable gain from the disposition of the home.
2. Some or all of the gain from the sale of a personal residence qualifies for exclusion from income. You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.
* You meet the ownership test.
* You meet the use test.
* During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.
2007-10-06 20:58:52 · answer #1 · answered by MukatA 6 · 0⤊ 0⤋
No, if you sold the house then you wouldn't have to pay tax on the gain on the sale up to $250,000 ($500K on a joint return - that's what living in the home for two of the last five years is about.
If you are insolvent at the time of the foreclosure, you might not have to pay tax on the loan amount that's forgiven.
2007-10-06 19:26:00 · answer #2 · answered by Judy 7 · 0⤊ 0⤋
The general rule is if the existing loan is from purchase money then there may not be any tax consequences. If you took money out and or refinanced since then, you may have some taxes to pay. Best to see a CPA or licensed tax professional to advise you.
2007-10-09 08:16:49 · answer #3 · answered by RealEstatePro 1 · 0⤊ 0⤋