ok need some advise, I spoke to our financial guy but he seemed unsure on the tax implications for each. we are aware of the credit hits and are not concerned that will improve with time, and besides that we plan on being debt free and follow the Dave Ramsey life style. so please don't focus on that aspect.
Foreclouse- are there tax hits with letting your property go? ie. adding to your income the differance of the price of the home and adding that to our regular wages?
Same question for the deed in lieu of- swince we will be handing it back over to the bank and essencially walking away but on better terms.
short sale- is there really a oops I screwed up that the IRS will in essance over look the 1099 and we not get dinged for the differance of the sale to what we owe?
I would really like to hear from anyone who has gone through any of these things. we have had our house up for sale for a 1.5yr and in short sale for about 9mos. our realtor has asked if we want to do a deed in lieu of since there have not been any bites on the house. thanks in advance for any info.
ok I am not getting my question answered yes we do have a CPA and NO!!!!! we really dont care about our credit rating that will be fixed with time what I am asking is will we be hit with taxes for doing any of these? we are no longer living in the house bc we had to move out of state for my hubby's job. our acct has never had to do a short sale in all of his years of being a CPA (25+ years).
Is your financial guy a professional financial guy?
These are questions to ask a CPA. I happen to be married to one, but he says he can't really give professional advice on a site like this one. (Don't know why.) You'd do well to find one in your own neighborhood, though. It may cost you a little money, but from the sound of your questions I think the cost will be well worth it.
My husband and me did a shortsale on our home in 2007. We proved hardship with all the forms, proof of income...savings, bills etc. We had to go through an inspection of the home and the realtor began our short sale process in August of 2007, we had numerous people wanting to buy except the bank kept turning them down. We stopped the process for 2 months due to my mother passed away then started it up again in Nov 2007 (after we moved out).
A buyer came in from California purchased our home in Dec 2007; all the paperwork and finalization did not occur until the end of March 2008 due to slow processing from Wells Fargo. The rest of the amount owed was forgiven and we even got a few thousand back at signing during key turnover at the realtor's office. We were informed that a shortsale is better than foreclosure or deed-in-lieu due to we would be elgible to buy another house in 2 years.
Actually after having built that house, completly disliking our noisy neighbors, and us both laid off from IT in 2003 it took a while to find a job in a saturated market at that time. So buying another house is not high on our priority list; we enjoy renting. Its nice to not be under a long mortgage any longer and great to have the freedom to move especially with my husband's job that constantly speaks of relocating us. A short sale was the best move we ever made. We had a great realtor that worked hard to get our home sold. Good luck. do what is in your best interest.
No advice offered here...but I'm proud of you for following Ramsey's advice! That credit score doesn't matter, does it?
I pray that you've received an answer that will help. My husband let his old house go back to the bank about the time we first got together. I don't recall any extra taxes because of that, though.
I would think that your lender, or your tax prep person would be able to answer these questions for you for. it's worth a shot. I've seriously considered these options as well, and am just holding on as long as we can. Good luck
you have to ask your mortgage company, it's up to them if they are going to send you a 1099.....i believe the tax rate is 30% of the loss, but again it's up to your mortgage company.....my SIL's was waived by the bank, she was able to show a true hardship (that's what she told me), divorce, major medical bills, huge loss of income due to being mostly commissioned......i beleive she did a short sale......love Dave Ramsey, best of luck
You will get a 1099 for what you owe. I believe there is a form you can file to request it not be included. Not sure how the IRS decides yes or no on that. As for the foreclosure, and whether the bank can still come after you for the difference depends on the structure of foreclosure in the state where this happened. The best thing for you to do is to contact a non-profit (not one of those crazy infomercial types of things that you see in the middle of the night because you are up worrying about this) that is approved by HUD to do foreclosure counseling. Contact someone in the state where the foreclosure process is taking place (where you have the house) and find out how it works there. http://www.hud.gov/offices/hsg/sfh/hcc/fc/
I don't have any answers, but I wanted to say thanks for asking this question. We are trying to short sale our home (also on the Dave Ramsey plan - love his Total Money Make-over). However, this was something we never considered or even thought about. I will be watching for the answers.
I was a Realtor, and you're Realtor should be able to give you more answers on this......or at the least point you to someone who can.........
I too believe a short sale is better. But, you need to make sure you are doing what is right for you. There are real estate attorneys out there.......but a CPA might be a better choice.....even if you go through legal aid or there is a group of people who are retired professionals.......They are called SCORE....(www.score.org) stands for Service Corps of Retired Executives......there might be a CPA in there that can help and they are all over everywhere, and since you are from Indy, I know they have them, I taught them when I was at New Horizons Computer Learning Center.....I think they are in Carmel.....but there might be one closer to you.......
Good Luck and take care.......
There are two situations that you could fall into....#1 You will not have to include in income the amount of indebtedness you are relieved of if you are deemed to be insolvant prior to the sale/foreclosure/deed in lieu. Insolvant means your total liabilities are greater than your total assets. The second situation is that the IRS is allowing taxpayers to exlude from income up to $2 Million of discharged debt of their principal residence. Your CPA should have known this or at least known where to look. You can do the research yourself at www.irs.gov. First read "The Mortgage Forgiveness Debt Relief and Debt Cancellation" Act. If you need more information, read Publication 4681. I am a CPA and this has been all over the professional publications for the past few years. I am shocked to hear that you have a CPA and he didn't know where to look and it sounds like he hasn't even heard of this. I am not familiar with "deed in lieu" and therefore don't know for sure what would happen in this situation, but I would like it would follow the same rules as foreclosures/short sales. Seriously, real the above mentioned Act and Publication, but keep in mind this all pertains to principal residences. If this property is not your principal residence, then yes the difference between what you owe and what the bank agrees to settle the debt for is taxable income to you.
I just sold my home on a short sale so I haven't received the 1099 form yet but the mortgage company has to send it. I'm also filing bankruptcy because there is a chance they can come after me for the difference and bk has to be file within 90 days after closing. Anyway my attorney told me in order to avoid paying taxes on the difference I need to file insolvency, there's a special tax form. I guess that all depends on your income too. I would think you would get a 1099 with a foreclosure or deed in lieu also and with a foreclosure they are far more likely to come after you for the difference unless you file bankruptcy. Not sure about a deed in lieu but since that is something that is up to the bank you could ask them. Good luck!
