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?
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.
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