How to Report 1099-A Income Taxes
A 1099-A may be issued to you if you go through foreclosure of if you abandon your residence. This must be reported on your taxes because the Internal Revenue Service (IRS) considers such events sales, and as such a capital gain or loss must be determined on the property. While normally capital gains are taxable events, for home sales there are some ways to avoid tax.
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Instructions
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Read a copy of the instructions for Form 1099-A. The IRS publishes instructions for the Form on their website, or you can call the IRS and request a copy. As reporting your 1099-A information incorrectly could result in tax penalties, it is important to fully understand the information on it, especially if you are not working with a tax adviser.
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Examine your 1099-A. The selling price of your home, for capital gains purposes, will be either the fair market value of the home, which will be listed in Box 4, or the amount of the outstanding loan balance, which will be in Box 2. The date of disposition will be listed in Box 1. The date of purchase does not appear on a 1099-A, but you should have that in your records. If the fair market value of your home exceeds your outstanding loan balance, and the lender canceled your debt as part of the foreclosure, you may also have cancellation of debt income, which will appear on Form 1099-C. Form 1099-C is often issued instead of Form 1099-A in these instances.
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Calculate your capital gain or loss. Using Schedule D, "Capital Gains and Losses," enter the information from your 1099-A as directed, and the disposition price less the purchase price will be your gain or loss. If you have a gain, you can exempt up to $250,000 ($500,000 for married couples) from your taxes once every two years. The IRS does not allow you to take a loss on the disposition of your primary residence.
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Check current tax legislation for exemptions. The Mortgage Relief Act of 2007 absolved taxpayers of paying income tax on any debt forgiven as part of a foreclosure between 2007 and 2012.
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References
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