Search Site
Menu

Will I Be Taxed on my Foreclosed Home?

Many people worry about the tax ramifications of canceled debt and foreclosures when they consider filing for bankruptcy, and rightly so.  No one wants to get the “fresh start” bankruptcy affords just to be hit with massive taxes the following April.  However, when you receive a discharge of your debts in bankruptcy, you do NOT have to pay taxes on those discharged debts.  But what if you don’t file for bankruptcy and a debt is just “charged off” or your home foreclosed upon?

As of today, the Mortgage Debt Forgiveness Act has not been extended.  This is the program that Congress was supposed to extend last year and has not yet made the decision to do so.  It expired on Dec. 31, 2013.  However, most people believe this will be extended retroactively here very soon (sometime in the Spring 2014).  However, if the Act is NOT extended, homeowners could definitely be liable for the forgiven or “canceled” debt associated with foreclosures.  The same is true for other canceled or “charged off” debts including credit cards, medical bills, etc.

Insolvency is one way to avoid these taxes.  You are insolvent if, at the time the debt is forgiven, your total debts are more than the fair market value of your total assets.  This would be something that you would have to “take up” with the IRS if you received a 1099C from any of the banks or creditors who foreclosed or “charged off” any of your debt.  Please visit IRS.gov for a complete list of criteria to avoid paying taxes on canceled debts.  Filing bankruptcy would avoid all liability for any canceled or forgiven debt, so please speak with one of our experienced attorneys at Jeff Field & Associates today and let us help you through this difficult financial time.

Leave a Reply

Your email address will not be published. Required fields are marked *

Videos
Our Attorneys
Client Reviews
  • google
    5.0/5.0

    Jeff Fields and Laura Everett were wonderful! It was hard but they were so helpful and with me every step of the way. They answered every question and were very accessible. I hope noone has to experience this road, but if you do, try Jeff Field & Ass...

    Read more

    Becky Sharpe

  • google
    5.0/5.0

    I had my concerns about filing initially, but Jeff walked me through the process and with his calm demeanor, made this process not at all as daunting as I initially thought it would become. The process flowed effortlessly and Cassie (a BIG shout out ...

    Read more

    Charita Willis

  • google
    5.0/5.0

    Due to medical expenses and serious physical problems I had to file bankruptcy. I was nervous and really depressed about the whole situation. I called Jeff Field & Associates and felt at peace after talking to a lawyer. I decided to go with them and ...

    Read more

    Sherri Ellis

  • google
    5.0/5.0

    Outstanding work!! They were great from day 1!!! Thank you

    Read more

    L B

  • google
    5.0/5.0

    They Get the Job Done Trust me Right Away Fast Luv them

    Read more

    Gary Phifer

See all reviews
Contact us

Please fill out the form below and one of our attorneys will contact you.

Quick Contact Form