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Treesolver · Feb 11, 2012, 03:10 PM

My house went into foreclosure. How does that affect my income tax situation? Also, my grown daughter, age 24, has been living with me. Can I claim her as a dependent? I feel like I'm going to be really screwed because I don't have a house to claim anymore and am living in an apartment now. Any thoughts?

Fr_Chuck · Feb 11, 2012, 04:27 PM

How are you feeling screwed, I am sorry, is it not the bank that has been screwed, you borrowed money from them, they paid the seller of the house. They expected to be paid back.
You did not pay them back and they had to take the house. The house now is most likely not worth the money the paid out. So sorry, how is that screwing you ?

I am sorry if you lost your job or for some reason could not follow though with the payments that you promised to make. But that is the agreement, if you could not pay for the house, you would move out.

Fr_Chuck · Feb 11, 2012, 04:27 PM

How are you feeling screwed, I am sorry, is it not the bank that has been screwed, you borrowed money from them, they paid the seller of the house. They expected to be paid back.
You did not pay them back and they had to take the house. The house now is most likely not worth the money the paid out. So sorry, how is that screwing you ?

I am sorry if you lost your job or for some reason could not follow though with the payments that you promised to make. But that is the agreement, if you could not pay for the house, you would move out.

Treesolver · Feb 11, 2012, 04:51 PM

I bought the house for 40 thousand at 10.5 percent. It was forclosed and a neighborhood association bought it with a city grant. They completely gutted the house, including new siding, driveway, backyard etc. They sold it for 85 thousand.

AtlantaTaxExpert · Feb 15, 2012, 02:23 PM

To answer your tax question, it depends on whether you were held liable for any debt that resulted from the foreclosure because the FMV of the house was not enough to cover the loan balance.

If FMV was enough to cover the balance, then there are NO tax liabilities. If not, there MAY be a tax obligation on the difference IF you are in a recourse state.

As for claiming your daughter, if you provided MORE than half of her total support AND she did not earn more the $3,700 in 2011, you can claim her. If she is attending college, the earning limit does NOT apply.