What Is Form 1099-A: Acquisition or Abandonment of Secured Property?
Form 1099-A: Acquisition or Abandonment of Secured Property is a federal tax form filed by lenders to report properties transferred due to foreclosure. The Internal Revenue Service (IRS) requires that lenders file in the year following the calendar year in which a taxpayer acquires an interest in the property or first knows — or has reason to know — that it has been abandoned. Issuers must include details about the sale, including the date of transfer and the property's fair market value (FMV).
- All real estate sales and transfers must be reported to the IRS.
- Form 1099-A is typically used to report the transfer of foreclosed or abandoned property.
- Lenders must submit a copy of Form 1099-A to the IRS and another to the borrower.
- Taxpayers report information from Form 1099-A on Schedule D of their tax return.
- The IRS treats capital gains from foreclosure the same as a traditional sale.
Who Can File Form 1099-A?
Form 1099-A is used by lenders, such as banks and other financial institutions, to notify the IRS when a property is sold or transferred because of foreclosure. As noted above, lenders must submit the form in the year after the calendar year someone acquires an interest in the property. The lender can file if they know or believe the property is abandoned.
There are three copies of 1099-A. The lender files Copy A with the IRS, sends you Copy B, and retains Copy C. If you don't receive a 1099-A and believe you should have, contact your bank or lender. You do not need to submit it when you file your tax return, but you should hold onto it for your records.
Here’s a quick rundown of Form 1099-A. The left side of the form features details about the lender and the borrower, including names, addresses, tax identification numbers (TINs), and the borrower’s account number. The right side of the form has six boxes:
- Box 1: Date of lender’s acquisition or knowledge of abandonment. Box 1 shows the date the lender acquired the property or the date the lender first knew the property was abandoned.
- Box 2: Balance of principal outstanding. Box 2 shows the balance on your loan (principal only) when the lender acquired the property or the date the lender first knew the property was abandoned.
- Box 3: Reserved. This is usually left blank.
- Box 4: Fair market value (FMV) of property. Box 4 shows the fair market value of the property. If the amount in Box 4 is less than the amount in Box 2 and your debt is canceled, you may have cancellation of debt income. If so, you should also receive Form 1099-C.
- Box 5: Check if the borrower was personally liable for repayment of the debt. Box 5 shows if you were liable for the debt at the time it was created or, if modified, at the time of the most recent modification.
- Box 6: Description of property. Box 6 shows the address of the property. If that doesn’t adequately describe the property, the lender will enter the section, lot, and block of the property.
You can exclude up to $250,000 of gains ($500,000 for married couples filing jointly) from the sale or exchange of property owned and used as a principal residence.
How to File Form 1099-A
If you lost a home or other real estate property due to foreclosure, you receive a copy of Form 1099-A in the mail for your records from your lender. If you had more than one mortgage or loan for a single property, you receive multiple 1099-A forms. They are sent by January 31 each year.
Use the information found on Form 1099-A to report the foreclosure on your tax return. You'll need to enter the information Schedule D of Form 1040, where you report any capital gains or losses. To calculate the gain or loss, start with the purchase price of the property, add the cost of major improvements, and subtract the amount of allowable depreciation and casualty and theft losses.
If you’re not liable for any debt that remains on your loan, you won’t use the fair market value; instead, you’ll use the outstanding mortgage balance at the time of foreclosure.
All federal tax forms are available on the IRS website. You can download a copy of Form 1099-A by clicking on this link.
The information found on Form 1099-A can help sellers determine if there is a gain or loss on the sale of the property and if any capital gains taxes are due.
Other Relevant Forms
If the foreclosure includes the cancellation of debt, your lender should also send you a copy of Form 1099-C: Cancellation of Debt. This means if any part of the loan is forgiven, you will receive this additional form on top of Form 1099-A. This form is sent to you if you had more than $600 worth of debt forgiven or canceled in any way. This figure is considered a form of income and must be listed on Form 1040.
What Is Form 1099-A Used for?
Form 1099-A is a federal tax form lenders submit to the IRS whenever they acquire property as a result of foreclosure or when it has been abandoned. One copy is sent to the IRS and the other is sent to the taxpayer to report on their annual tax return. The lender retains the final copy.
How Do I Get Form 1099-A?
You will receive Form 1099-A if you had property that was abandoned or foreclosed. The lender who held your mortgage or loan is responsible for sending it to you. Forms are generally sent to taxpayers by January 31 by mail. If you don't receive one, contact your lender for a replacement.
How Do I Report Form 1099-A on My Tax Return?
The information found on the form must be included on Schedule D of Form 1040. Calculate your gains or losses by subtracting the purchase price for the property (minus any improvements you made) from the fair market value listed on 1099-A.
The Bottom Line
Form 1099-A is typically used to report the transfer of foreclosed or abandoned property. Your lender will send you a copy of the form, usually by January 31, and will send another copy to the IRS. If you receive Form 1099-A, you will need to report it on Schedule D of your tax return that year.
Form 1099-A can help you determine if you have any capital gain or loss from the foreclosure of your property. Capital gains from foreclosure are treated the same as capital gains from a traditional sale. You will need to report them and pay taxes. If the foreclosure includes cancellation of debt, you will also receive Form 1099-C and will have to report any canceled debt as income on your tax return as well.
Correction—April 20, 2023: The gain/loss calculation incorrectly stated that home improvements are subtracted from the purchase price. This article has been amended to state that the gain or loss is calculated using the purchase price plus the cost of improvements minus allowable depreciation and casualty and theft losses.