I had a short sale with 118k income 1099c, I sold for 185k bought for 365k. my taxes are 32k which is about 1/2 my yearly income. I there any thing to lower the tax?

Answer

You may be eligible to exclude this cancelled debt from income if it was your main home. You should revisit the 1099-C section and make sure that you answer the questions to tell TurboTax that this 1099-C was for the cancellation of debt or mortgage forgiveness on your principal residence or main home. (you can easily revisit the 1099-C section by logging into your account, selecting "take me to my return" and typing "1099c" in the search bar and then clicking the "Jump to 1099c" link that shows up)

See the informatoin below to see if you qualify to exclude that amount of cancelled debt from your income: 

Note: For tax year 2018, the exclusion for canceled debt is currently unavailable. At this time we don't know when, or if, Congress will approve it for tax year 2018. If the exclusion is approved after your file your 2018 return, you can file an amendment to claim it. Alternatively, you can postpone filing your return until Congress definitively approves or denies the canceled debt exclusion.

The following info pertains to tax years 2007-2017 and is provided for reference only.

The Mortgage Forgiveness Debt Relief Act of 2007 provided special relief to homeowners whose qualified mortgage debt was forgiven by lenders. Under the Act, the forgiven debt could be excluded from taxable federal income.

To qualify, the debt must have been on your primary residence (not a second home, investment, or rental property) and forgiveness must have been granted between January 1, 2007 and December 31, 2017, both dates inclusive.

In addition, the mortgage must have been used to purchase, build, or substantially improve your home.

Refinanced mortgages qualified, but only up to the amount of the original mortgage principal before the refinance. Refinance proceeds that were used to buy a car, pay off credit cards, or other purposes didn't qualify for relief (that is, they counted as taxable income).

The maximum amount of debt forgiveness that could have been excluded from taxation is $2 million ($1 million for married couples filing separately).

Not all states followed this law, which meant that some taxpayers still had to pay state tax on forgiven mortgage debt.


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