Are you able to subtract home improvements from your deficiency judgement???

[Jillian118]

My friend said you are able to do this (she is not the most reliable source..btw) I have no idea where she got this info and I cannot find anything on it on line.

So bascially she is saying that when you get a 1099c or a deficiency that you can subtract any monies you spent on improving the home to bring that number down.

I think she is nuts, but would love anyone to tell me the contrary.

[justdeb]

I dont think you can... if we could do that, then we'd all be able to claim home improvement expenses on our taxes, and we cant do that either. Wish we could The new roof and windows would've been a great tax deduction last year and the year before!

If you find something - let us know!

[Jillian118]

I dont think you can... if we could do that, then we'd all be able to claim home improvement expenses on our taxes, and we cant do that either. Wish we could The new roof and windows would've been a great tax deduction last year and the year before!

If you find something - let us know!

I have no idea where she comes up with this stuff half the time. I have been searching on line and haven't found anything to that effect either, but I figured someone on here would know for sure.

[justdeb]

Jillian,

I THINK I found what she may have been referring to... but its not what she's thinking. Its on the capital gains tax issue. Read here... Real Estate Blog - Short Sales Deficiency Judgments Tax Liability

and scroll down until you see Taxable Gain - #2

wonder if thats what she's thinking?

[Jillian118]

Jillian,

I THINK I found what she may have been referring to... but its not what she's thinking. Its on the capital gains tax issue. Read here... Real Estate Blog - Short Sales Deficiency Judgments Tax Liability

and scroll down until you see Taxable Gain - #2

wonder if thats what she's thinking?

ahmm... still reading, but I had no idea about this

1. Enter the fair market value of the property foreclosed (or net sales proceeds from a short sale). For non-recourse loans, enter the amount of the debt immediately prior to the foreclosure. __________
2. Enter your adjusted tax basis in the property. (Usually your purchase price plus the cost of any major improvements.) ____________
3. Subtract line 2 from line 1. If less than zero, enter zero. __________
The amount on line 3 is your gain from the foreclosure of your home. If you have owned and used the home as your principal residence for periods totaling at least two years during the five year period ending on the date of the foreclosure, you may exclude up to $250,000 (up to $500,000 for married couples filing a joint return) from income.
For non-recourse debt short sales when the seller and buyer require the cancellation of the debt by the lender as a condition of the sale, the debt cancellation is included in the sale proceeds, like for a foreclosure.

[justdeb]

yeah...I didnt know about that either.... so are you reading it the way I am - and they're saying you're still liable for the difference no matter what? ... or am I not reading that correctly? It sure does sound like it.

So if thats how it is - then how in the hell does it work if they decide not to 1099 you for the difference - I guess you still pay it no matter what?

Kind of confusing.

[jakelabry]

Wouldn't any improvements made be reflected in the fair market value? You never get 100% return on investment with any improvement - at least not in a real, non bubble world!