Question

I have a question about reporting short sale on taxes. I sold my home in a short sale in 2020 for thousands of dollars less than the amount I owed on it. We didn’t buy another home, and are renting an apartment. Do I have to report the sale on my return?

Answer

Yes. You are responsible for reporting short sale on taxes. You must report the sale on Form 8949. This transfers to a Schedule D for the year of sale if:

  • You received a 1099-S or other substitute form.
  • You claimed the first-time homebuyer credit.

You should subtract your basis and selling expenses from your sales price to figure gain or loss. When reporting, any gain is taxable. Any loss — Such as when you are reporting short sale on taxes — Is a nondeductible personal loss.

You might also have cancellation of debt. It’s reported on Form 1099-C. Cancellation of debt is taxable in the year the debt was cancelled, unless an exception applies.

 

Related Topics

Related Resources

Dividend Reinvestment

Learn more about mutual fund and stock dividend reinvestments from the tax experts at H&R Block.

Adjusted Basis

Learn more about the adjusted cost basis method of selling shares and get tax answers at H&R Block.

What Is Alternative Minimum Tax?

What is the alternative minimum tax, and are you eligible for an exemption? Learn more about AMT rates and get tax answers at H&R Block.

Gambling Winnings Tax

Did you win it big? Learn more about gambling winnings tax and form W-2G from the tax experts at H&R Block.