What Is Form 1099-A and How Does It Affect Your Taxes?

Form 1099-A is the information return your lender sends after it forecloses on, repossesses, or concludes you’ve abandoned property that secured a loan. Its official name is “Acquisition or Abandonment of Secured Property,” and it carries three numbers that drive the tax consequences: how much you still owed, what the property was worth, and whether you were personally liable for the debt. Those figures determine whether the transaction produces a capital gain or loss, ordinary income from canceled debt, or both.

When a Lender Sends You This Form

Federal law requires any lender that makes secured loans in the course of a trade or business to file Form 1099-A when it either takes an interest in the property to satisfy the debt or has reason to believe the borrower abandoned it.1Office of the Law Revision Counsel. 26 U.S. Code 6050J – Returns Relating to Foreclosures and Abandonments of Security In practice, that covers foreclosure sales, deeds in lieu of foreclosure, and vehicle or equipment repossessions. Abandonment is often inferred from shut-off utilities, physical neglect, or months of silence from the borrower.

The rule reaches beyond banks and home mortgages. Any business lending against collateral falls under it, so the form can show up after the loss of a rental property, a business vehicle, or investment real estate. You should receive your copy by January 31 of the year following the event.2Internal Revenue Service. 2026 Publication 1099

Reading the Boxes That Matter

Four boxes on Form 1099-A do the real work:

Compare every figure against your loan statements and closing records. If the outstanding balance or fair market value looks off, ask the lender for a corrected form before you file. A wrong number here propagates through every calculation that follows.

Form 1099-A Versus Form 1099-C

After a foreclosure, you may also receive Form 1099-C, Cancellation of Debt. The 1099-A reports the transfer of the property itself. The 1099-C reports any portion of the debt the lender later forgave. They produce different kinds of income: the 1099-A can generate capital gain or loss, while the 1099-C generates ordinary income.

When both events happen in the same year, the lender can file just a 1099-C and complete the property-related boxes on it, skipping the 1099-A entirely. If the foreclosure happens in one year and the debt cancellation the next, expect a 1099-A first and a 1099-C the following year.3Internal Revenue Service. Instructions for Forms 1099-A and 1099-C

Figuring Gain, Loss, or Canceled Debt Income

The IRS treats a foreclosure or repossession as a sale, even when you handed the keys back voluntarily.5Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments Two numbers drive the calculation: the amount realized (what you’re treated as having received) and your adjusted basis (generally what you paid plus improvements, less any depreciation claimed).6Internal Revenue Service. Topic No. 703, Basis of Assets The Box 5 checkbox determines how you compute the amount realized.

Nonrecourse Debt

If Box 5 is unchecked, you weren’t personally liable. The amount realized equals the full outstanding debt in Box 2, even when that exceeds the property’s fair market value. Nonrecourse foreclosures never produce cancellation of debt income, because the lender’s only remedy was the property itself.5Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments

Recourse Debt

If Box 5 is checked, the math splits. For the gain or loss calculation, your amount realized is the smaller of the outstanding debt or the property’s fair market value. Separately, if the fair market value is less than the debt, the shortfall is ordinary income from canceled debt rather than a capital item.5Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments The difference is significant. Capital gains often qualify for preferential rates. Canceled debt income is taxed at your ordinary marginal rate.

An example makes the split concrete. Say you owed $300,000 on a recourse mortgage, the home was worth $220,000 at foreclosure, and your adjusted basis was $200,000. You have a $20,000 capital gain ($220,000 minus $200,000) and $80,000 of ordinary cancellation of debt income ($300,000 minus $220,000). Both need to be reported unless an exclusion applies.

Exclusions That May Reduce the Tax

Home Sale Gain Exclusion

If the foreclosed property was your primary residence and you owned and lived in it for at least two of the five years before the foreclosure date, you can exclude up to $250,000 of gain from income, or $500,000 on a joint return.7Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence For most homeowners, this wipes out any capital gain. It does not touch canceled debt income.

Insolvency Exclusion

If your total liabilities exceeded the fair market value of all your assets immediately before the debt was canceled, you were insolvent, and you can exclude canceled debt from income up to the amount of that insolvency.8Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness If you were insolvent by $60,000 and had $80,000 of canceled debt, $60,000 is excluded and the remaining $20,000 is taxable. You claim the exclusion by attaching Form 982 and checking the insolvency box on line 1b. You also have to reduce certain tax attributes, such as net operating losses or basis in other property, by the excluded amount.5Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments

One boundary worth knowing. The qualified principal residence indebtedness exclusion, which many homeowners relied on in past cycles, does not apply to debts discharged after December 31, 2025.9Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments For 2026 discharges, insolvency is the main relief available outside bankruptcy.

Where Form 1099-A Goes on Your Return

Personal Home or Investment Property

Report the gain or loss on Form 8949, which flows to Schedule D of Form 1040.10Internal Revenue Service. Instructions for Form 8949 Enter a description of the property, the date you originally acquired it, the Box 1 date as the date sold, the amount realized as the proceeds, and your adjusted basis as the cost. Totals carry over to Schedule D.11Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses Losses on personal-use property, including your home, are not deductible.

Business or Rental Property

If the foreclosed property was used in a business or held as a rental, use Form 4797 instead.12Internal Revenue Service. Instructions for Schedule D (Form 1040) Form 4797 also handles depreciation recapture: depreciation you claimed during ownership gets recaptured as ordinary income when the property is disposed of, even by foreclosure.13Internal Revenue Service. Instructions for Form 4797 Many landlords are surprised by this extra layer of tax.

Canceled Debt Income

Ordinary income from canceled recourse debt is reported separately from the property transfer. Publication 4681 includes a worksheet that walks through both calculations side by side, and using it is the most reliable way to get every figure onto the right line.5Internal Revenue Service. Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments

Records To Keep

Hold onto Form 1099-A, your original purchase closing statement, records of improvements, and any depreciation schedules until the statute of limitations for the tax year of the foreclosure has run.14Internal Revenue Service. How Long Should I Keep Records That is generally three years from the filing date, but it extends to six years if you understated income by more than 25%. Foreclosure returns are complex and often draw IRS matching notices, so keeping records longer than the minimum is the safer approach.