Do I Have to Pay Tax on a 1099-C?

 

 

Video Summary

 

The answer to that is you possibly might have to pay, but there’s any number of reasons why you would not have to pay. A 1099-C indicates that your Lender has forgiven a portion of the debt that you owe and that is considered income. So I get many calls concerning this and people are panicked that they are gonna have to pay a lot of income tax. However, there are, first off, you have to go to the analysis to see if you also have an offsetting loss when you sold the property. So if you purchased the property for a whole lot more than what you sold it for, you have a loss which would offset any gain. There’s also an exclusion in the Internal Revenue Code that says if you have lived in the property two and resided there two out of the past five years, then you can exempt up to $250,000.00 of gain. So there are some other exemptions. There’s also, if this is not your homestead property, if you were insolvent and can show that, you’d have to consult with your CPA, you also do not have to pay any tax on the 1099-C. So the answer is, it’s a reporting form that I would suggest you take to a Certified Public Accountant to address the situation and if you have any questions give me a call at 727-847-2288.