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What is a 1099-A form?
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What is a 1099-A form?
Buying a house is no small feat, especially in this economy. But sometimes, things can change, and you might find yourself facing foreclosure. If this happens, you’ll be receiving a 1099-A form from your lender.
This form is just one of the multiple 1099 forms that the IRS has in circulation. Form 1099-A, also known as the ‘Acquisition or Abandonment of Secured Property’ form, is mainly used when you’ve lost any kind of property to foreclosure.
Your mortgage lender (or lending institution) will send you this information form to indicate that your property has been repossessed and sold.You will receive a separate form from each of your lenders if you have multiple mortgages,
If you’re a self-employed individual, freelancer, gig worker or independent contractor, this form is pretty different from the other 1099 forms you may know, like the 1099-NEC. But it is still an important form to be aware of if you own any property (personal or business use) because you’ll need it when you file your taxes.
Key takeaways:
- Form 1099-A is sent by lenders if property has been foreclosed and sold
- The deadline to receive this form is January 31
- This form will be sent regardless of how you use your real estate property
Who receives a 1099-A form?
Let's say you bought a house in 2023 with the help of a mortgage loan. As an architect your income fluctuated in 2024 because you were in between jobs and you ended up missing a few payments. Your lender then took ownership of your home and foreclosed it.
The lender will then have to fill out a 1099-A stating the home’s market price, the date when it was foreclosed and how much debt is still unpaid. They will then file it with the IRS and send you a copy.
As the borrower, you'll need to check this form to see whether you have a recourse or non-recourse loan. If you have a recourse loan, you still need to repay the outstanding debt to your lender.
If it’s a non-recourse loan, you don't have to pay. And if your lender forgives the outstanding loan payment, the amount you didn’t pay will be considered taxable. You’ll know this is the case if you also receive Form 1099-C. If you were insolvent when your property was foreclosed, the unpaid amount is not taxable.
Quick tip
If you haven't received a 1099 form on time, don't sweat it. There's no penalty for it, and you can still file your tax returns as long you have all your bank statements and receipts.
How do I report Form 1099-A?
It is important to note that if you're also self-employed, this doesn't affect your self-employment taxes in any way. You'll still have to pay that 15.3% tax based on your income which you can calculate based on the 1099 forms you receive (like 1099-K or 1099-MISC).
You can also deduct any industry-relevant business expenses as tax deductions and lower your taxable income even further. A 1099 tax calculator can help you do that easily.
Now, if you receive Form 1099-A, you'll need to report that information Schedule D. This is mainly the case for property bought for personal use. You will report the “sales price” of the property along with any capital gains or losses. Subtracting the property sales price from the original purchase price will give you the capital gain or loss.
The sales price depends on what type of loan you had. If it is a recourse loan, the sales price will be the lesser of two options: the property's fair market value (FMV) or the outstanding loan amount. If you have a non-recourse loan, you will use the latter.
The sales price also depends on the state you live in, so make sure to research your state lending laws. For example, if you're self-employed and living in California, you can use a California tax calculator to get a full breakdown of your federal and state taxes.
If you have a capital gain, the IRS lets you exclude this from your taxes if you fulfill two conditions. You have to have lived on the property for at least two of the past five years and your gain was less than $250,000 if you’re filing as a single or $500,000 if filing jointly. This is a tax break called Section 121, and only applies to homes that were used as the primary residence.
If you bought property to use for your business or as an investment, you'll need to fill out Form 4797. This can quickly get very complicated, so it's best to seek professional help.
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