Foreclosure Tax

Until recently having your home foreclosed on also meant that the IRS would impose a foreclosure tax. This tax was calculated as the difference between your loan amount and the amount of money the lender got for the house.

For example, if you had a home you owed $200,000 on and after foreclosure, the lender was able to get just $150,000 for it, you would have to pay tax on the $50,000. This $50,000 would be taxed as ordinary income meaning you'd have to pay taxes on it as if you had earned it at a job. In many cases, this tax would be significant.

Finally, at the end of last year, the government decided to do away with this ridiculous tax. Please see the link below to read about this tax in the IRS website.

Click here to go the IRS web site.

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