a friend is thinking about returning his house to the bank as it has become impossible for him to afford it. Will he owe taxes to the IRS or onybody?
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a friend is thinking about returning his house to the bank as it has become impossible for him to afford it. Will he owe taxes to the IRS or onybody?
He is concerned about whether he will be responsible for taxes during a foreclosure and also would his permanent home and other assets in FL be at risk?
Asked on May 11, 2009 under Real Estate Law, Florida
Answers:
B. B., Member, New Jersey Bar / FreeAdvice Contributing Attorney
Answered 14 years ago | Contributor
Your friend should talk to a Florida real estate attorney, for the best way to go about this. One place he can find a lawyer is our website, http://attorneypages.com
For personal income taxes, the best source of advice is usually a CPA or a tax lawyer. As a general rule, as long as he does not owe the bank more money than he has put into buying the property (and any permanent improvements), he wouldn't have a profit to report as capital gain, and he might even be able to get a tax break on the loss, especially if he rented the house out.
Property taxes, though, keep going on, no matter what, and as long as he still owns the house, that would be your friend's obligation. There might be a way to make the transfer happen quickly, since it seems to me that doing that would be in everyone's best interest.
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