I am considering a short sale on the my house, as I am looking at a negative equity situation. I am up to date on my payments, but will have no money to bring to closing. It looks like I will have to sell it for $10K less than I owe on it. I have consulted a lawyer who says it is a viable option. I also understand the waived amount will be taxed as %26#039;phantom%26#039; income. Is it taxed as a paycheck would be? or like an early withdrawl IRA? Lastly, will it impact my credit score even though I am up todate on my payments, but won%26#039;t be able to come up with the diff between what I owe on the loan and what it%26#039;s selling for... implementing short sale? Thanks!!
Short sale tax and credit score?
The sales expenses will be subtracted from the proceeds of the sale, increasing the deficit of the sale. The short fall will result in a 1099 being issued for the forgiven amount. Check with a tax person, but it is my understanding that forgiven debt on a house sale is not taxable or it is likely to become law soon. If not the shortfall is treated just like ordinary income.
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