If your home has been foreclosed upon, you may receive a document from your lender called Form 1099-A, officially titled Acquisition or Abandonment of Secured Property. This form provides important details about the foreclosure, including the date of the event, the outstanding loan balance, and the fair market value of the property.
What do I do with a 1099-A?
If you're wondering what to do with Form 1099-A or asking yourself "what do I do with a 1099-A?", here’s how to handle it based on how the property was used:
If the Property Was NOT Used for Business (e.g., your personal residence):
Go to:
- Federal Section
- Income (Select My Forms)
- Investments
- Stocks, Mutual Funds, Cryptocurrency, Collectibles, etc.
Enter the following:
- Date Acquired: Original purchase date of the home
- Date Sold: Use the date in Box 1 of Form 1099-ASales Price: Use either Box 2 (loan balance) or Box 4
- (FMV), depending on whether the loan was recourse or non-recourse
- Cost Basis: Original purchase price (found on your HUD-1 closing statement)
If the Property Was Used for Business (e.g., rental property):
Go to:
- Federal Section
- Income (Select My Forms)
- Less Common Income
- Sale of Business Property (Form 4797)
Recourse vs. Non-Recourse Loans
- If Box 5 is checked, it likely means you had a recourse loan, and you may be personally liable for any unpaid debt.
- If it’s a non-recourse loan, your sales price is the full amount of the outstanding debt (Box 2), even if the FMV is lower.
What If I Received Form 1099-C Instead?
When you borrow money, you’re not taxed on it because you’re expected to pay it back. But if the lender cancels or forgives the debt, you’re no longer obligated to repay it. From the IRS’s perspective, that’s essentially the same as receiving income.
If you receive Form 1099-C (Cancellation of Debt) instead of 1099-A, it means the lender forgave the remaining debt.
Report it as cancellation of debt income:
Go to:
- Federal Section
- Income (Select My Forms)
- Less Common Income
- Cancellation of Debt (Form 1099-C, Form 982)