foreclosure forms
What does foreclosure mean for my taxes?
A property that I am a co-signer on is going into foreclosure. In a question I asked previously regarding this matter, someone pointed out that I will be sent a 1099-c form. What exactly does this mean? If the house is sold at auction will I owe taxes on the amount the house sells for or the amount that was owed or, if the house does not sell for enough, will I owe taxes on the amount not paid?
If we can sell the house before the foreclosure is complete, how does that impact the situation? I’m so confused.
And please, no posts about your tax or loan company. I will report it as abuse.
I know most of the answer.
If the property is a personal residence and sells for more than the mortgage amount, but less than a gain of $250k for a single filer ($500k for a married filer), then there are no tax implications- assuming certain rules under the IRC are met.
If the personal property sells for less than the outstanding mortgage amount plus interest, costs, and fees, then it depends on what the lender does. If the lender gets a deficiency judgement and goes after the borrower for the rest, then again, there should be no tax implications- yet. If the lender writes off the deficiency, this write off is taxable income to someone. If the primary borrower does not pay it, then it is possible that the IRS could come after you (this is the one part of my answer about which I am not 100% certain).
If the property is classified as business or trade property, then there WILL be a taxable gain or loss on the property that someone has to claim. Again, the IRS will make sure that someone pays.
Early Steps to Prevent Foreclosure for Austin Homeowners
Steps to Prevent Foreclosure
You already know a Plan B is important, but what should it include? The first steps to take in creating your plan are to:
- Save money.
Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems. - Reduce expenses.
Think about where you can save money; for instance, temporarily canceling cable or your gym membership. By paring down to the bare necessities, you may be able to save a significant amount of money. And even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps. - Find a New Job/Earn extra income
Sometimes Job less is unavoidable. But don’t let it get you down. There is always a new opportunity in the horizon. You can contact your local unemployment office for assistance in finding a new job. Also, you can post your resume and perform job searches online with sites such as hotjobs.com, monsterjobs.com. If you are currently working then earning extra income can help you meet your financial goals. There are plenty of part-time and home-based jobs available.
Use our budget worksheet to help think about which changes you can make if you find yourself facing financial difficulties.
If you’ve put your Plan B into action and still find yourself having trouble paying the mortgage, you should:
- Call your lender.
This is the single most important thing you can do. Lenders want borrowers, not properties – they would prefer to see you keep your home. Most will work with you while you get back on your feet. - Be honest with your lender.
Different situations require different solutions. It will matter to your lender to know if your financial problems are temporary, for example, due to an injury that puts you out of work for a few months, or are more long term, such as a cut in pay or a layoff. - Know what you owe.
Have a clear picture of what your debts are and make your mortgage the priority if you have to make choices. Debt collectors can be very aggressive, but if you can’t pay all your debts, make sure your home is protected from foreclosure by paying your mortgage. - Talk to a housing counselor.
A non-profit housing counseling agency may be able to help you restructure your bills so that you have an easier time paying them. Additionally, they can help you create a budget that suits your specific needs. - Contact a housing counseling firm.
A housing counselor can give you valuable advice. Fill out our Troubled Homeowner foreclosure form or call our helpline, 888-512-3232, is dedicated to helping homeowners facing foreclosure 24 hours every day.
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