The “foreclosure tax”

Uncle Sam’s hand

If you are forced to sell your home at a loss, unlike with other investments, the losses are not tax-deductible.

Worse, if you get foreclosed and the bank sells the home for less than what you paid for it, the IRS considers the difference to be taxable income. Yup, if you bought a house for $300,000, and the bank foreclosed, selling it for $250,000, the IRS will send you a form 1099c saying you owe on $50,000 of income. Which seems monumentally unfair to me.