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How Can I Avoid Paying Taxes On The Forgiven Debt After Foreclosure?

If you’ve received a 1099 from the mortgage lender who foreclosed on your home, you’re probably feeling pretty used and abused by now.

If you’re like most people who’ve been through foreclosure, you spent months trying to work with the mortgage company while they harassed you by telephone and the mail, failed to negotiate in a settlement conference, had a lawyer serve you with an eviction notice, and finally took your home and sold it.

Now you’ve received a tax statement from them for the amount of the canceled debt, as though they’d handed you that amount in cash and you’d been living happily on it ever since.

It’s brutal treatment that was prohibited by federal law for several years during the Great Recession, but is now legal again.

To avoid the tax liability, the IRS allows several forms of exemption.

First, bankruptcy may be a viable option for you to clear the liability.

Second, if you were insolvent when the debt was canceled, some or all of the debt may be tax-free to you.

It’s important to get informed help when dealing with foreclosure tax matters.

Call Zelenitz, Shapiro & D’Agostino today at 718-599-1111 to learn what options are best for you.