What Form 1099-A Is For

Form 1099-A is an informational tax document that lenders send to borrowers when a foreclosure or property abandonment occurs. Think of it as the IRS's way of tracking what happens when you can no longer keep up with payments on a secured loan—like a mortgage on your home, a car loan, or a business property loan—and the lender either takes the property back or discovers you've abandoned it. IRS.gov

When you originally borrowed money to buy property, you didn't pay taxes on that loan because you had an obligation to repay it. But when the lender forecloses on the property or you walk away from it, the IRS treats this situation as if you "sold" the property. This means you might have a taxable gain or a deductible loss, depending on your circumstances. Form 1099-A provides the essential numbers you need to figure out your tax situation. IRS.gov

The form reports two critical pieces of information: the outstanding loan balance (principal only, not interest or fees) at the time of foreclosure or abandonment, and the fair market value of the property at that same time. You'll use these numbers along with your original purchase price and any improvements you made to calculate whether you have a gain or loss to report on your tax return.

It's important to understand that you, as the borrower, don't file Form 1099-A yourself. The lender files it with the IRS and sends you a copy. Your job is to use the information on the form to accurately report the transaction on your own tax return.

When You’d Use Form 1099-A (Late or Amended Filing)

As a borrower, you don't file Form 1099-A—your lender does. However, you should receive your copy by February 15, 2019 (for the 2018 tax year). If you haven't received this form by mid-February and you know a foreclosure or abandonment occurred in 2018, contact your lender immediately to request it. IRS.gov

If you receive a Form 1099-A with incorrect information—such as the wrong property value, incorrect loan balance, or mistaken personal liability status—don't ignore it. The IRS has received a copy with the same information, so discrepancies can trigger questions. Contact your lender right away to request a corrected form. The lender will need to file a corrected return with the IRS and send you an updated copy. IRS.gov

On your end, if you failed to report the foreclosure or abandonment on your original tax return, you'll need to file an amended return using Form 1040-X. This situation can arise if you didn't receive the 1099-A in time, didn't understand you needed to report it, or simply overlooked it. You should amend your return as soon as you discover the error, as failure to report can result in IRS notices and potential penalties.

Keep in mind that even if the 1099-A shows a transaction that doesn't result in taxable income (perhaps you qualify for an exclusion or the transaction resulted in a loss on personal-use property), you typically still need to report the transaction on your return to show the IRS you've accounted for it properly.

Key Rules for 2018

Lender Filing Requirements

Lenders must file Form 1099-A for each borrower when they acquire an interest in secured property through foreclosure or similar proceedings, or when they know (or have reason to know) the borrower has abandoned the property. This applies whether the lender is in the business of lending money or not—even one-time lenders with secured loans must comply. IRS.gov

Personal vs. Business Property

The reporting requirements differ based on how you used the property. For property held solely for personal use (like your primary residence or a personal vehicle), different tax consequences apply than for business or investment property. Personal-use property losses are generally not deductible, while investment property losses may be. The form itself asks whether you were "personally liable" for the debt, which affects how you calculate your tax consequences. IRS.gov

Recourse vs. Nonrecourse Debt

One of the most important distinctions on the 2018 Form 1099-A is whether you had "recourse" or "nonrecourse" debt. Box 5 on the form indicates whether you were personally liable for repaying the debt. With recourse debt (where you're personally liable), your "amount realized" equals the property's fair market value. With nonrecourse debt (where you're not personally liable), your amount realized equals the entire outstanding loan balance. This distinction can dramatically affect whether you have taxable gain. IRS.gov

Coordination with Form 1099-C

If your lender also canceled part of your debt in 2018 (meaning you no longer owe the remaining balance), you might receive both a Form 1099-A and Form 1099-C, or the lender might issue only Form 1099-C with boxes 4, 5, and 7 completed to satisfy both reporting requirements. Canceled debt often counts as taxable income, but important exclusions exist, particularly for principal residences foreclosed between 2007 and 2017 under the Mortgage Forgiveness Debt Relief Act. IRS.gov

Abandonment Definition

The IRS considers property "abandoned" when objective facts indicate you intended to permanently discard it from use. Lenders have "reason to know" about abandonment based on all circumstances concerning the property's status. However, if the lender expects to commence foreclosure within 3 months of discovering potential abandonment, reporting can wait until the foreclosure completes or the 3-month period expires. IRS.gov

Step-by-Step (High Level)

Step 1: Verify the Information

Carefully review all boxes on Form 1099-A. Check that Box 1 (date of acquisition or abandonment), Box 2 (outstanding principal balance), Box 4 (fair market value), and Box 5 (personal liability checkbox) are accurate. Verify that Box 6 correctly describes your property. If anything looks wrong, contact the lender immediately for a corrected form.

Step 2: Gather Your Records

Collect documentation showing your "adjusted basis" in the property—essentially what you originally paid for it, plus the cost of improvements, minus any depreciation you claimed (for business or rental property). You'll also need closing statements, receipts for capital improvements, and records of any insurance payments received.

Step 3: Calculate Your Amount Realized

Your amount realized depends on whether you had recourse or nonrecourse debt (Box 5). For recourse debt, use the fair market value from Box 4. For nonrecourse debt, use the outstanding loan balance from Box 2. This is the trickiest part of the calculation, so consider consulting Publication 4681 or a tax professional.

Step 4: Determine Gain or Loss

Subtract your adjusted basis from your amount realized. If the result is positive, you have a gain; if negative, you have a loss. Remember, losses on personal-use property aren't deductible, but gains might be taxable (though exclusions may apply for your main home).

Step 5: Report on the Correct Tax Form

For your main home, report the transaction on Schedule D (Capital Gains and Losses) and Form 8949 (Sales and Other Dispositions of Capital Assets). For business property, use Form 4797 (Sales of Business Property). If you qualify for the exclusion of gain on the sale of a main home (up to $250,000 for single filers or $500,000 for married couples), you may be able to exclude part or all of your gain. IRS.gov

Step 6: Check for Debt Cancellation

If you also received Form 1099-C showing canceled debt, or if Box 4 shows the property value was less than Box 2 (the loan balance), you may have cancellation of debt income to report. Consult Publication 4681 to determine if you qualify for any exclusions, particularly if the foreclosure involved your primary residence.

Common Mistakes and How to Avoid Them

Mistake #1: Ignoring the Form Entirely

Many taxpayers mistakenly believe that losing a home means they have nothing to report since they received no money. However, the IRS treats foreclosure and abandonment as a sale of the property, which almost always requires reporting—even if you have no taxable gain. Failing to report can trigger IRS notices and audits. Always report the transaction, even if it results in zero tax owed.

Mistake #2: Confusing Recourse and Nonrecourse Debt

Box 5 indicates whether you were personally liable for the debt, but many taxpayers misunderstand what this means for their tax calculation. With recourse debt, the lender can pursue you for any deficiency (amount still owed after the property sale), so your amount realized is limited to the property's fair market value. With nonrecourse debt, the lender's only recourse is the property itself, so your amount realized is the full loan balance. Using the wrong number can result in significantly understating your gain and subsequent IRS correction notices.

Mistake #3: Overlooking Cancellation of Debt Income

When the property's fair market value (Box 4) is less than the outstanding loan balance (Box 2) on recourse debt, the difference might be canceled debt that counts as taxable income. Many taxpayers only calculate the gain or loss on the property itself and forget to address the debt cancellation aspect. Always check whether you need to report cancellation of debt income, though important exclusions may apply.

Mistake #4: Claiming Losses on Personal-Use Property

Losses from the foreclosure or abandonment of property used solely for personal purposes (your home or personal car) are not deductible. Many taxpayers incorrectly try to deduct these losses, which leads to IRS rejections. Only losses on business or investment property are potentially deductible. However, gains on personal-use property may still be taxable, subject to exclusions for principal residences.

Mistake #5: Using the Wrong Form

The correct form for reporting depends on the type of property. Main homes go on Schedule D and Form 8949; business property goes on Form 4797. Filing on the wrong form can delay processing and trigger IRS inquiries. Refer to Publication 523 (for home sales) or Publication 544 (for other property) for guidance on which forms to use.

Mistake #6: Failing to Apply Available Exclusions

Several exclusions can reduce or eliminate tax on foreclosures, particularly the exclusion of gain on the sale of a main home (up to $250,000/$500,000) and the Qualified Principal Residence Indebtedness exclusion for certain debt forgiveness. Many taxpayers don't realize these exclusions exist and unnecessarily pay tax on amounts that could have been excluded. Review Publication 4681 carefully or consult a tax professional to identify all applicable exclusions.

What Happens After You File

No Tax Due

If your calculation shows no taxable gain (perhaps due to exclusions or because the property's value didn't exceed your adjusted basis), you'll simply report the transaction and move forward. The IRS will match the information on your return to the Form 1099-A they received from your lender. As long as everything matches and you've reported correctly, you shouldn't hear anything further.

Tax Owed

If your calculation results in taxable gain or cancellation of debt income, you'll owe tax on that amount according to your tax bracket. Capital gains rates may apply for gains on property held more than one year. You'll pay this tax with your regular tax return by the April filing deadline, or make estimated tax payments if you discover the liability before year-end.

IRS Matching Program

The IRS uses an automated system to match Forms 1099-A against filed tax returns. If you don't report the transaction at all, or if the amounts you report don't reasonably match the 1099-A data, you'll likely receive a CP2000 notice (Proposed Changes to Your Tax Return) several months to a year after filing. This notice proposes tax adjustments based on the unreported information. You can agree with the assessment or dispute it by providing documentation supporting your position.

State Tax Consequences

Don't forget about state income tax. Most states require similar reporting of foreclosures and abandonments, though state rules on debt cancellation and exclusions may differ from federal rules. Check your state's requirements separately.

Credit Impact

While not strictly tax-related, understand that foreclosure and abandonment have lasting effects on your credit score and ability to obtain future loans. The Form 1099-A itself doesn't directly affect your credit, but the underlying foreclosure certainly does.

Future IRS Correspondence

If you claimed exclusions or special treatment, the IRS may request supporting documentation during processing or in a later audit. Keep all records related to the foreclosure—closing statements, improvement receipts, prior tax returns showing depreciation, correspondence with the lender, and anything supporting your basis calculation or exclusion claims—for at least three years after filing, or longer if significant amounts are involved.

FAQs

Q1: I lost my home to foreclosure but didn't receive a Form 1099-A. Do I still need to report it?

Yes. Even without a Form 1099-A, you must report the foreclosure on your tax return. The lender may have filed the form but failed to send you a copy, or they may have issued Form 1099-C instead (which can satisfy the 1099-A requirement). Contact your lender to request the proper form. If you can't obtain it, gather your own documentation showing the date of foreclosure, final loan balance, and property value, and report the transaction based on that information. Include a note explaining the situation with your return.

Q2: Can I exclude the gain from my home foreclosure if I had to move due to job loss?

Possibly. The Section 121 exclusion allows you to exclude up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of your main home if you owned and lived in it for at least 2 of the 5 years before the foreclosure. If you meet these requirements, you can claim the full exclusion even though the "sale" occurred through foreclosure rather than a voluntary sale. Reduced exclusions may apply if you can't meet the full 2-year requirement but had to move due to employment changes, health issues, or certain other unforeseen circumstances. See Publication 523 for detailed rules.

Q3: The lender sent me both Form 1099-A and Form 1099-C. How do I report both?

When you receive both forms, report each aspect separately. Use Form 1099-A to calculate and report the gain or loss on the property transfer itself (on Schedule D/Form 8949 or Form 4797). Then use Form 1099-C to report cancellation of debt income (on Schedule 1, Line 8z of Form 1040). However, you may qualify for exclusions on the canceled debt, particularly if the foreclosure involved your main home. Complete Form 982 (Reduction of Tax Attributes) if you're claiming an exclusion from cancellation of debt income. See Publication 4681 for coordination rules.

Q4: I abandoned my rental property in 2018 but didn't tell the lender. Will they still send Form 1099-A?

Yes, they likely will. Lenders are required to file Form 1099-A when they have "reason to know" property was abandoned based on objective facts—missed payments, property condition, utilities shut off, tenant reports, etc. Even if you never formally notified the lender, their investigation of the property's status will likely lead them to conclude abandonment occurred. You should report the abandonment in the year it occurred, which is when you permanently stopped maintaining the property and intended to stop using it, not necessarily when the lender discovered it.

Q5: I received Form 1099-A for a car repossession. Do I need to report this?

It depends. If the car was used solely for personal purposes, you don't need to file Form 1099-A for personal property. However, most lenders still send the form. You must report the transaction if any of these apply: the car was used partly or fully in your business, it was held for investment, or the debt was canceled (creating potential cancellation of debt income). If the car was 100% personal use and the debt wasn't canceled, losses aren't deductible, but you may still need to report if the lender pursued you for a deficiency and then canceled it.

Q6: Can I deduct foreclosure-related expenses like lawyer fees or moving costs?

Generally, no. Legal fees and other costs directly related to the foreclosure itself typically can't be deducted as separate items. However, you may be able to reduce your gain (or increase your loss) by including certain costs in your adjusted basis or reducing your amount realized. For business or investment property, some expenses might qualify as investment expenses, though these deductions are limited under 2018 tax law. Moving expenses are no longer deductible for most taxpayers under tax reform unless you're an active-duty military member. Consult a tax professional for guidance on your specific situation.

Q7: What if I disagree with the fair market value shown in Box 4 of Form 1099-A?

The fair market value shown is typically based on the foreclosure sale price or an appraisal obtained by the lender. If you believe this value is inaccurate, you can use a different value on your tax return if you have strong supporting documentation—such as a professional appraisal you obtained around the same date, or comparable sales data. Attach a statement explaining why you're using a different value and include supporting documentation. However, expect potential IRS questions, so make sure your alternative valuation is well-supported. For foreclosure sales, the gross foreclosure bid price is generally considered the fair market value by the IRS unless you can prove otherwise.

Important Resources

• Publication 4681: Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals)
• Publication 523: Selling Your Home
• Publication 544: Sales and Other Dispositions of Assets
• Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness

All forms and publications are available at IRS.gov.

This guide is based on 2018 tax law and official IRS instructions. Tax laws change frequently, and individual circumstances vary significantly. This information is for educational purposes and should not be considered tax advice. Consult a qualified tax professional for guidance on your specific situation.