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I went through a short sale this past year on my rental

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Hi, I went through a...
Hi, I went through a short sale this past year on my rental property. (the town wouldn't allow me to rent it out short term for higher rent so I couldn't pay the bills) I also had a 2nd mortgage. 1st loan was $250,000. 2nd was 35,000. The house sold this past June for $185,000. I just received a 1099 from the 2nd mortgage lender for $31,000.They only got $4,000 from the sale. I also received a 1098 mortgage interest for $78,000 from the 1st mortgage. I haven't received a 1099 from the first yet. My question is, will the mortgage interest help me undo the 1099 I may get?
Submitted: 1 year ago.Category: Tax
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Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year ago
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Q: will the mortgage interest help me undo the 1099 I may get?

A: The mortgage interest deduction will reduce your taxable income. While you will be able to claim the $78,000 as a deduction, only a percentage of that amount applies towards the reduction of your taxable income. The mortgage interest deduction won't cancel out the 1099-C income.

For more information regarding mortgage interest deduction, you can refer to the IRS Pub 936.

Link to Pub 936:

https://www.irs.gov/pub/irs-pdf/p936.pdf

Let me know if I can be of further assistance to you regarding this matter.

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