What the IRS May See

Forgiven debt = income. That means if a lender writes off part of your mortgage in a short sale or foreclosure, the IRS might treat that as taxable income.

Exceptions

• Primary residence exclusions
• Insolvency rule
• Mortgage Forgiveness Debt Relief Act (when renewed)

What You Should Do

• Talk to a tax professional early
• Ask if a short sale or deed in lieu is better for your return
• Save documentation from the lender

We work with CPAs and tax advisors who specialize in distressed property exits.

Also Read: What’s the Real Cost of Doing Nothing?