Form 1099-A: Foreclosure Tax Guide for Expats

What is Form 1099-A? Foreclosure Tax Reporting for US Expats

What is Form 1099-A?

Form 1099-A, Acquisition or Abandonment of Secured Property, is an IRS form indicating when a lender takes possession of property from a borrower through foreclosure or when the borrower abandons the property voluntarily. The lender is responsible for filing the form to inform the IRS and the borrower that a significant event has taken place—one that may necessitate a tax obligation.

Even if you are overseas, if you had a foreclosure of a US mortgage or relinquished a property that collateralized a loan, the IRS expects you to report on it based on the data on Form 1099-A.

Why Foreclosure Reporting Matters for US Expats

If you're an expat American who had a US property foreclosed, you may still be required to pay US taxes. The IRS doesn't forget about tax responsibilities just because you've left the country. Indeed, not reporting income or debt cancellation due to foreclosure—even if it's an error—may incur penalties.

Here's why you need to keep a close eye on Form 1099-A as an expat:

1. It may signal a taxable capital gain or income from canceled debt.
   
   
2. It can impact your foreign income exclusion or Foreign Tax Credit (FTC) eligibility.
   
   
3. Even if you no longer own US property, the IRS still requires proper reporting.
   

When Do You Receive Form 1099-A?

You’ll receive Form 1099-A if your US property has been:

1. Foreclosed (taken back by the lender through legal action), or
   
   
2. Voluntarily abandoned (you gave up ownership and left the property),
    and the property was used as security for the loan.
   

If a foreclosure also included debt cancellation, you can expect a second type—Form 1099-C, Cancellation of Debt.

Making Sense of the Key Boxes on Form 1099-A

These figures assist in deciding if you possessed a gain or loss on the property, and whether any canceled debt is taxable income.

How to Report Form 1099-A on Your US Tax Return (When Abroad)

Whether you're an overseas US citizen or not, the IRS still wants you to file and report foreclosure activity accurately.

Step 1: Decide if You Incurred a Gain or Loss

You have to equate the fair market value and forgiven loan to what you initially paid. It is taxed as if you sold the property.

1. Gain: If the FMV or forgiven loan is greater than what you owed, it may lead to taxable gain.
   
   
2. Loss: Personal home losses are not deductible, but if it was an investment or rental home, you may be able to write it off.
   

Step 2: Report the "Sale" on IRS Form 8949 and Schedule D

Compute the gain or loss on Form 8949 and report it summarized on Schedule D (Capital Gains and Losses).

Step 3: Check if Debt Was Forgiven

If your creditor forgave part or all of the debt, you might also get Form 1099-C. In general, debt that was canceled is taxable income except:

1. You were insolvent when (use Form 982 to claim exclusion), or
   
   
2. You are subject to the Mortgage Forgiveness Debt Relief Act (if it is extended for the year at issue).

Special Expatriate Considerations

Living abroad introduces some additional complication to your tax picture:

1. You Still Have to File

All US citizens and green card holders, no matter where they reside, must report worldwide income, including foreclosure deals.

2. Foreign Tax Credit & FEIE

The proceeds from canceled debt or capital gains might influence your qualified status for the Foreign Earned Income Exclusion (FEIE) or limit your Foreign Tax Credit (FTC) advantages.

3. Currency Exchange

Any amounts on the 1099-A should be expressed in US currency by the relevant IRS exchange rate when the property is situated outside the US or when you are reporting local loan agreements.

What If You Don't Get Form 1099-A?

Occasionally, expats don't get tax forms because they have out-of-date addresses or don't have access to US mail. That does not mean you get out of it.

If you're aware that your property was foreclosed or you surrendered it, you still must:

1. Estimate the foreclosure date and FMV at foreclosure
   
   
2. Report the occurrence on your tax return
   
   
3. Talk to a US tax adviser, particularly if Form 1099-C is also in the picture
   

Common Mistakes to AVOID

1. Not filing at all because you thought it didn't apply overseas
   
   
2. Forgetting to report canceled debt as income
   
   
3. Misclassifying the property (investment vs. personal)
   
   
4. Overlooking Form 982 if you were insolvent at the time
   

Bottom Line

Form 1099-A isn't a formality—you can actually impact your US taxes even if you're an expat. Expats need to be careful to report transactions related to foreclosures to the IRS. If you experienced a foreclosure or left behind a property secured with a loan, you'll likely be required to file supplemental forms such as 8949, Schedule D, or 982, and possibly declare canceled debt as income.

FAQs About Form 1099-A for Expats

Is 1099-A the same as 1099-C?

No. Form 1099-A is used to report the transfer of property, and Form 1099-C is used to report canceled debt. Occasionally, you'll get both. Report each of them separately.

What will happen if I don't report Form 1099-A?

You may face IRS penalties or an audit if you don't report, particularly if the IRS gets the form from your lender and cross-references it with your return.

I reside outside the country and did not receive Form 1099-A—what can I do?

You are still responsible for reporting the foreclosure. Attempt to get a copy from your lender or mortgage servicer. Or estimate the main numbers and seek the advice of a tax advisor.

Am I able to deduct losses from a foreclosed residence?

If the property was your home, you can't take a deduction. If it was rental or business property, you may be able to deduct the loss against other income.

How do I translate the amounts on 1099-A to USD if the property was overseas?

Apply the IRS annual average exchange rate or the date of foreclosure rate. Record your selection and be consistent.

Need Help?

Foreclosure reporting as an expat has a way of getting complicated quickly—particularly if foreign exchange or debt cancellation is involved. If it's unclear, get the advice of a US expat tax professional to ensure you remain compliant.