Can I deduct anything for my home being sold through a short sale?

[Anita01 · Accepted solution]

If you sold your primary residence for less than the mortgage debt you owed, you cannot deduct any loss on it.  Losses from the sale of your residence are never deductible, no matter how it is sold.  

If sold for less than the mortgage amount, you may receive a 1099-A or 1099-C that shows debt forgiveness income.  Wait until you receive the 1099-C before you enter the home sale.  Such debt forgiveness is usually taxable but there are exceptions for debt forgiveness on a primary residence.  Since the IRS receives a copy of the 1099-C, though, you will have to enter it in the program and answer all the questions in order to receive the special treatment for home sales.