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Merlo
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Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I purchased a house in 2003 for 375,000. As values ...

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I purchased a house in 2003 for 375,000. As values increased I refinanaced to 495,000 and eventually took our a second for 180,000. I tried to sell the home as a short sale but I ended up losing it to foreclosure. I live in the state of California. What are my likely tax ramifications and am I responsible for re-paying the additonal amount I borrowed vs. the eventual selling price of the house?
Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

HelloCustomer

The tax consequences of a foreclosure can be complicated, and will ultimately depend on what the mortgage company is able to sell your home for. If the mortgage company sells your home for less than the current mortgage balance, then you may be subject to income tax on the portion of the debt that they end up cancelling.

As far as the second mortgage, you would still be responsible for paying whatever additional debt was owed. If the sale from the home brought in more money than was owed on the first mortgage, the court would then pay the second mortgage with the additional proceeds, but if it were not paid in full, you are still responsible for the debt.

If there is any way possible for you to pay enough off on your mortgage to get your home out of foreclosure, it will definitely be in your best interest.

If this answer has been helpful, please press the "Accept" button. Positive feedback is also greatly appreciated. Thanks for the question and good luck in getting this worked out.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 4 other Tax Specialists are ready to help you

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