What is my tax responsibility on a home foreclosure.?
Question:
Answer:
Consult a lawyer, you are responsible for the loss.
Usually you will be held responsible for a portion. Unless you file bankruptcy in the same year the bank forecloses on the home. The bank will attempt to sell the home. You will be responsible for the difference between the sale price of the home and the amount you still owed on the home. Example: If you still owed $80,000 on your loan and the bank could only sell the home for $40,000, you have to report that $20,000 as income. You will get a 1099-Cancellation of Debt form from the bank at the beginning of the next year. It should be reported on Line 21 as income.
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