When the first buyer of my house defaulted, he agreed to forfeit $5,000 to compensate me for additional rental expenses I incurred due to his default. Is this taxable?
If yes, are any legal fees incurred to reach this settlement deductible?
01562
1 Replies
TomD8
Level 15
Jan 24, 2021 7:38:02 AM
A seller who retains both the earnest money deposit and the property must treat the forfeited deposit as ordinary income.