- Who sends it
- Your lender, to you and to the IRS
- What it starts
- Something you must report on your tax return for that year
- Do this first
- Check the amounts and dates, then talk to a tax professional before you file
What these forms are
- Form 1099-A: a lender files it when it takes the property that secured a loan, such as through a foreclosure or deed in lieu, or knows the property was abandoned. It shows what you owed and the home's fair market value. You use it to work out any gain or loss, because the IRS treats a foreclosure as a sale.
- Form 1099-C: a lender files it when it cancels $600 or more of debt and an "identifiable event" has happened. If the foreclosure and the cancellation happen in the same calendar year, the lender may file only a 1099-C.
What it does and does not mean
- It does not by itself mean you owe tax. Whether you do depends on the kind of loan and whether an exclusion applies.
- Canceled debt is generally taxable income unless an exclusion applies.
- If you were personally liable for the loan (recourse debt), you are treated as selling the home for its fair market value, and canceled debt above that value is ordinary income unless excluded. If you were not personally liable (nonrecourse debt), there is no canceled-debt income, only a gain or loss.
- If a form is wrong, or never comes, you still must report the correct amount.
The 2026 deadline problem: the main home exclusion
The exclusion for forgiven debt on your main home (qualified principal residence indebtedness) covers only debt discharged before January 1, 2026, or discharged later under an arrangement entered into and evidenced in writing before that date. For a foreclosure, short sale or principal reduction in 2026 without such a written arrangement, it generally does not apply. When it did apply, it was limited to $750,000 ($375,000 married filing separately) of acquisition debt on the main home.
Exclusions you may still use
- Insolvency: if your total debts were more than the fair market value of everything you owned just before the debt was canceled, you can exclude canceled debt up to that shortfall.
- Bankruptcy: debt canceled in a bankruptcy case is excluded.
- You claim an exclusion on IRS Form 982, attached to your return.
Read taxes after foreclosure for more, and IRS Publication 4681 for worksheets.
What to do this week
- Check the form: your name, the date, the amount of debt, and the fair market value. If something is wrong, ask the lender in writing to correct it.
- Make a list of everything you owned and everything you owed just before the debt was canceled. You will need it for the insolvency test.
- Find any written agreement with your lender dated before January 1, 2026, about forgiving debt on your main home.
- Talk to a tax professional before you file.
- Check whether your state allows lenders to collect a deficiency, and whether your sale left surplus money. See your state's after the sale page.
These are federal tax rules, the same in every state. State law decides a related question: whether the lender can still come after you for any balance left after the sale (a deficiency). Your state's page covers deficiency rules. Ask a tax professional about your state return.
Scams tied to tax forms
- Anyone who promises to make a 1099-C "go away" for a fee. Only the lender can correct its own form, and exclusions are claimed on your own return.
- Anyone who asks for an upfront fee to "fix" your foreclosure taxes, or wants payment by wire, gift card or payment app.
Report scams at ReportFraud.ftc.gov.
How much time do you have? It depends on your state.
See the foreclosure timeline, deadlines and free local help for the state where the home is.
Common questions
I got both a 1099-A and a 1099-C. Do I report the debt twice?
No. The 1099-A is used to work out gain or loss on the transfer of the home, and the 1099-C reports canceled debt. A tax professional can help you put them together correctly.
My short sale was approved in 2026. Can I use the main home exclusion?
Generally only if you had a written arrangement with the lender dated before January 1, 2026. Otherwise look at the insolvency or bankruptcy exclusions.
I never got a form. Am I off the hook?
No. The IRS says you must report the correct amount of canceled debt even if no 1099-C arrives.
Keep reading
- Late notice and early intervention letterThis letter is a warning, not a foreclosure. Federal rules make your servicer reach out early and tell you about help. In most cases a foreclosure cannot start until you are more than 120 days behind, so this is the best time to act.
- Breach letter (demand or notice of intent to accelerate)A breach letter says you are in default and gives you a date to catch up. If you do not, the lender can call the whole loan due and move toward foreclosure. Many standard mortgages and deeds of trust require at least 30 days to cure.
- Notice of defaultIn many states that foreclose without a court, a recorded notice of default is the official start of the foreclosure. It is not a sale and not an eviction. It starts a waiting period before a sale can be set, and you can usually still catch up or apply for help.
- Notice of intent to forecloseMany states make the lender send a warning letter before it can start a foreclosure. These letters often give you a set number of days, a cure amount and a list of free counselors. The deadline in the letter matters, so act on it now.
- Lis pendens (notice of pendency)A lis pendens is a public notice, filed in the land records, that a lawsuit or foreclosure affecting your home is pending. It does not mean the home is sold or that you must move. It usually means the court papers are coming or have already been served.
- Foreclosure summons and complaintA summons and complaint means the lender has sued to foreclose. You have a short, firm deadline to respond in writing, often 20 to 30 days from the day you were served. Missing it can let the lender win without your side being heard.